Question

Ariel T. Corporation reported the following data for the month of February:

Inventories: Beginning Ending
Raw materials (Direct and Indirect) $40000 $24000
Work in process $23000 $17000
Finished goods $50000 $72000

Additional information:
Raw materials purchases $63000
Direct labor cost $73700

Manufacturing overhead cost actually incurred: $55000
Raw materials included in manufacturing overhead costs incurred as indirect materials $5000. Manufacturing overhead cost applied to Work in Process $48000.

Required:
The adjusted cost of goods sold that appears on the income statement for February is:________

Answer 1

Cost of goods sold = $191,700

Step-by-step explanation:

a) Cost of production:

Beginning Inventory: Raw Materials $40,000

Purchase of Raw materials $63,000

Ending inventory: Raw materials ($24,000)

Cost of raw materials used $79,000

Beginning Work in process $23,000

Cost of raw materials used $79,000

Direct labor cost $73,700

Manufacturing overhead $55,000

less Ending Work in process ($17,000)

Cost of production $213,700

Beginning Finished goods $50,000

Cost of production $213,700

Ending Finished goods ($72,000)

Cost of goods sold $191,700

b) The adjusted cost of goods sold takes into consideration the cost of raw materials used, the direct labor costs, and the manufacturing overhead, before adjusting for the beginning inventory and ending inventory.