Question

The balance in the Finished Goods inventory account at the beginning of the month was $79,000 and at the end of the month was $72,000. The cost of goods manufactured for the month was $361,600. The actual manufacturing overhead cost incurred was $118,400 and the manufacturing overhead cost applied to jobs was $112,000. The adjusted cost of goods sold that would appear on the income statement for July is

Answer 1

Adjusted cost of goods sold $ 375,000

Step-by-step explanation:

Under-absorbed overhead = Actual overhead - Absorbed overhead

= 118,400- 112,000 = 6,400

Under-absorbed overhead= 6,400

Data:

Opening inventory 79,000

cost of goods sold 361,600

under absorbed overhead 6,400

closing inventory 72,000

The income statement would as follows:

$

Opening inventory 79,000

Add cost of goods sold 361,600

Add under absorbed overhead 6,400

less closing inventory (72,000)

Adjusted cost of goods 375,000

Note the under absorbed overhead implies that the cost of manufactured reported before the adjustment for the under-absorbed overhead is under cost and charged. To correct this the under absorbed overheard figure is added back.