Question

Diane Clothing Co.’s accounts reflect the following: Cost of Goods Manufactured $550,000 Beg. Finished Goods Inventory $300,000 End. Finished Goods Inventory $350,000 Cost of Goods Sold ? Applied overhead $220,500 Actual overhead $200,000 If Sales were $800,000 and the company closes the over/under applied overhead balance to cost of goods sold, how much gross profit would the company report (after the overhead adjustment)? Correct! $320,500

Answer 1

$320,500

Step-by-step explanation:

Gross Profit is the net value of Sale and Cost of goods sold.

Cost of Goods sold is the cost of all the goods that is sold during the period excluding the cost of available Inventory.

Cost of Goods Manufactured is the cost of all the goods that is manufactured during the period including the cost of available Inventory.

First we need to calculate the under or overapplied overheads.

Overapplied overhead = Applied Overhead - Actual Overheads

Overapplied overhead = $220,500 - $200,000

Overapplied overhead = $20,500

Now calculate cost of Goods Sold,

Cost of Goods Sold = Cost of Goods Manufactured + Beg. Finished Goods Inventory - End. Finished Goods Inventory - Overapplied overheads

Therefore, we have:

Cost of good sold = $550,000 + $300,000 - $350,000 - $20,500 = $479,500

Gross profit = Sales - Cost of Goods Sold

Gross profit = $800,000 - $479,500

Gross Profit = $320,500

Answer 2

$320,500

Step-by-step explanation:

Over applied overhead = $220,500 - $200,000 = $20,500

Cost of good sold = Beg. Finished Goods Inventory + (Cost of Goods Manufactured - Over applied overhead balance - End. Finished Goods Inventory

Therefore, we have:

Cost of good sold = $300,000 + $550,000 - $20,500 - $350,000 = $479,500

Gross profit = $800,000 - $479,500 = $320,500