Question

The adjusted cost of goods sold using the direct method was $148,450. The overapplied overhead was determined to be $1,050 and the cost of goods manufactured was $145,000. What will be the adjusted cost of goods sold under the indirect method, if the beginning finished goods inventory was worth $4,500 and there was no ending finished goods inventory?

Answer 1

The adjusted cost of goods sold under the indirect method is $147,400, calculated by taking the direct method COGS of $148,450 and subtracting the overapplied overhead of $1,050.

Step-by-step explanation:

To calculate the adjusted cost of goods sold (COGS) using the indirect method, we start with the cost of goods manufactured, then adjust for any change in finished goods inventory, and finally adjust for any overapplied overhead. In order to find the adjusted cost of goods sold under the indirect method, we need to consider the beginning finished goods inventory and the difference in overapplied overhead.

Here's the calculation:

• Cost of goods manufactured: $145,000
• Add: Beginning finished goods inventory: $4,500
• Subtract: Ending finished goods inventory: $0 (since there was none)
• Subtract: Overapplied overhead: $1,050

This results in an adjusted COGS of $148,450 (which is the direct method COGS) minus the overapplied overhead of $1,050, giving us a final COGS of $147,400 using the indirect method.