1. A company operates a job-order costing system and applies overhead cost to jo
ID: 2550527 • Letter: 1
Question
1. A company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost. Its predetermined overhead rate was based on a cost formula that estimated $135,000 of manufacturing overhead and an estimated allocation base of $90,000 in direct labor cost. The company has provided the following data Beginnin Endin $11,000 Raw Materials Inventory (all direct) Work in Process Inventory Finished Goods Inventory The following actual costs were incurred during the year Purchase of raw materials (all direct) Direct labor cost Manufacturing overhead cost 45,000 71,000 36,000 61,000 $130,000 $100,000 $110,000 uppose the company closes out any under- or over-applied overhead cost to Cost of Goods Sold. How much was the company's adjusted Cost of Goods Sold? a. $337,000 b. $357,000 c. $377,000 d. $363,000 e. None of the aboveExplanation / Answer
Solution: 377,000
Working:
Direct material= 29,000 + 130,000 – 11,000= $148,000
Direct labor= 100,000
POHR = $135,000/$90,000 = $1.5/DL$
Applied OH = $1.5 * $100,000 = $150,000
Total manufacturing costs =148,000 + 100,000 + 150,000 = $398,000
COGM = 45,000 + 398,000 - 36,000 = $407,000
Unadjusted COGS = 71,000 + 407,000 - 61,000 = $417,000
Applied OH = $150,000
Actual OH = $110,000
Overapplied OH = $150,000 - $110,000 = $40,000
Adjusted COGS = Unadjusted COGS + Actual OH – Applied OH Adjusted COGS = $417,000 - 40,000 = $377,000
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