Question

Alana Company worked on three jobs during the month of September. These costs were as follows:

Job No. 4 Job No. 5 Job No. 6
Direct materials $46,000 $24,000 $62,000
Direct labor $80,000 $74,000 $40,000
Machine hours 2,400 1,600 2,000
Alana uses a predetermined overhead rate of $20 per machine hour to apply overhead. All three jobs were started during September. Job No. 5 and Job No. 6 were completed during the month, and Job No. 5 was sold on September 20. Job 4 had not been completed as of the end of the month. There were no beginning inventory balances.Alana’s cost of goods sold for September would be:
a.$130,000
b.$344,000
c.$132,000
d.$170,000
e.None of the answers are correct.

Answer 1

The cost of goods sold (COGS) for Alana Company for September, calculated based on the totals of direct materials, direct labor, and applied overhead for Job No. 5, is $130,000.Option a.$130,000 is correct.

Step-by-step explanation:

The student asked for the cost of goods sold (COGS) for Alana Company for the month of September. To find the COGS, we first need to calculate the total cost of each job, including direct materials, direct labor, and applied overhead based on machine hours. Alana Company uses a predetermined overhead rate of $20 per machine hour.

For Job No. 5 (the only job completed and sold):
Direct materials: $24,000
Direct labor: $74,000
Machine hours: 1,600 hours x $20/hour = $32,000 applied overhead
Total Job No. 5 cost = $24,000 (materials) + $74,000 (labor) + $32,000 (overhead) = $130,000

Since only Job No. 5 was completed and sold, the COGS for Alana Company for the month of September is $130,000, which corresponds to option a.