Rauth Inc. uses a job-order costing in which any underapplied or overapplied ove

Question

Rauth Inc. uses a job-order costing in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month. The company's cost of goods manufactured for August was $205,000; its beginning finished goods inventory was $73,000; its ending finished goods inventory was $53,800; its manufacturing overhead was underapplied by $3,700. Required Determine the cost of goods sold that would appear on the income statement for August, in other words, determine the cost of goods sold after adjustment for any underapplied or overapplied overhead ost of s sold

Explanation / Answer

Cost of Goods Sold = $ 1,89,500 Cost of goods sold before adjustment = Cost of goods manufactured - Opening Inventory + Closing Inventory = $ 2,05,000 - $ 73,000 + $ 53,800 = $ 1,85,800 Adjusted Cost of Goods Sold = Cost of goods sold before adjustment + Underapplied manufacturing Overhead = $ 1,85,800 + $   3,700 = $ 1,89,500

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