17 Frank Corporation reported the following data for the month of July Beginning

Question

17 Frank Corporation reported the following data for the month of July Beginning Ending Raw materials Work in process Finished goods Additional information: Raw material purchases Direct labor cost Manufacturing overhead cost incurred Indirect materials included in manufacturing overhead cost incurred Manufacturing overhead cost applied to Work in Process S 36.00024,000 23.000 7.000 S 37.00055,000 69,000 94,000 S 58.,000 8,000 S 56,000 If the company closes the over- or under-applied MOH entirely to Cost of goods sold (COGS, the amount of COGS that would appear on the income statement for July is: A. 209.000 211.000 213,000 231,000 E. None of the above

Explanation / Answer

ADJUSTED COST OF GOODS SOLD

WORKING NOTE 1:

DIRECT MATERIAL = RAW MATERIALS PURCHASED + OPENING RAW MATERIALS -

CLOSING RAW MATERIALS - INDIRECT MATERIALS INCURRED

= 69000+36000-24000-8000

= 73000

WORKING NOTE 2 :

TOTAL MANUFACTURING COST = DIRECT MATERIAL + DIRECT LABOUR +

MANUFACTURING OVERHEADS APPLIED

= 73000 + 94000 + 56000

=223000

WORKING NOTE 3 :

UNDERAPPLIED OVERHEADS = MANUFACTURING OH COST INCURRED -

  MANUFACTURING OH COST APPLIED

= 58000 - 56000

= 2000

PARTICULARS AMOUNT AMOUNT begining work in progress 23000 Direct material (working note 1) 73000 Direct labour 94000 manufacturing overheads 56000 total manufacturing cost (working note 2) 223000 TOTAL COST OF WORK IN PROGRESS (23000+223000) 246000 LESS: ending work in progess (17000) COST OF GOODS MANUFACTURED 229000 begining finished goods inventory 37000 cost of goods manufactured 229000 COST OF GOODS AVAILABLE FOR SALE 266000 LESS: ending finished goods inventory (55000) COST OF GOODS SOLD 211000 ADD: under applied overhead (working note 3) 2000 ADJUSTED COST OF GOODS SOLD 213000

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