A company adds overhead costs to jobs at the rate of $8 per direct labor hour. I

Question

                    A company adds overhead costs to jobs at the rate of $8 per direct labor hour. It accumulates overhead costs in a seperate manufacturing overhead account and                     uses normal costing to assign overhead. The following data provide details of the company's activity and balances during the last half of the year:                 

                    
                

                    July 1 December 1                 

                    DM inv. $62,250 $63,750                 

                    Work in Proc. Inv. 46,000 45,500                 

                    Fin. Goods Inv. 26,150 25,000                 

                    Monthly production data:                 

                    Direct mat. Purch. 157,000                 

                    Direct Labor cost 272,000                 

                    
                

                    
                

                    
                

                    c) At the end of December, the company found that it had actually incurred overhead cost of $123,000. IF the company adjusts over or underapplied overhead to                     cost of goods sold at the end of the year, what is the cost of goods sold after adjustment?                 

Explanation / Answer

b) Calculate the cost of goods manufactured during the period.

$272,000/$17 per hour = 16,000 direct labor hours

16,000 direct labor hours* $8 overhead per direct labor hour = 128,000 overhead applied

1. cost of goods manufactured:

Direct materials

Beginning inventory

62,250

purchases

157,000

available for use

219250

ending

63,750

direct materials used

155500

Direct manufacturing labor

272,000

manufacturing overhead

128,000

manufaturing costs incurred

555500

plus beginning wip

46,000

costs to account for

601500

less ending wip

45,500

cost of goods manufactured

556000

Answer: 556,000

c) At the end of December, the company found that it had actually incurred overhead cost of $123,000. IF the company adjusts over or underapplied overhead to cost of goods sold at the end of the year, what is the cost of goods sold after adjustment?

Cost of goods sold = cost of goods manufactured + beginning finished goods inventory

1. cost of goods manufactured:

Direct materials

Beginning inventory

62,250

purchases

157,000

available for use

219250

ending

63,750

direct materials used

155500

Direct manufacturing labor

272,000

manufacturing overhead

128,000

manufaturing costs incurred

555500

plus beginning wip

46,000

costs to account for

601500

less ending wip

45,500

cost of goods manufactured

556000

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