A carpenter company uses job-order costing. The following is a summary of factor
ID: 2471835 • Letter: A
Question
A carpenter company uses job-order costing. The following is a summary of factory operations:
Direct materials purchased on account
$125,000
Direct materials requisitioned
$110,000
Direct labor costs incurred
$256,000
Factory Overhead costs incurred (Depreciation Expense only)
$150,000
Cost of goods completed
$515,000
Cost of goods sold
$378,000
Sales on Account
$430,000
Factory overhead applied
?
Factory overhead costs are applied at 50% of direct labor costs.
Required:
1. What is the actual, correct amount of cost of goods sold?
Show steps please!
Direct materials purchased on account
$125,000
Direct materials requisitioned
$110,000
Direct labor costs incurred
$256,000
Factory Overhead costs incurred (Depreciation Expense only)
$150,000
Cost of goods completed
$515,000
Cost of goods sold
$378,000
Sales on Account
$430,000
Factory overhead applied
?
Explanation / Answer
Factory overhead applied = 50% of Direct labour cost = 50% * $256000 = $128000 Factory overhead incurred = $150000 Under - applied Factory overhead = $150000 - $128000 = $22000 Cost of goods sold = $378000 Finished goods = Cost of goods completed - cost of goods sold = $515000 - $378000 = $137000 Under applied factory overhead must loaded into cost of goods sold and finished goods proportionatly. Journal Entry to dispose of the variance using immediate write off method Date Account Title Debit Credit Finished goods 5852 Cost of goods sold 16148 Factory overhead account 22000 Actual and correct amount of cost of goods sold = $378000 + $16148 = $3,94,148
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