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21 November, 10:31

Morrow Corporation had only one job in process during May-Job X32Z-and had no finished goods inventory on May 1. Job X32Z was started in April and finished during May. Data concerning that job appear below: Job X32Z Beginning balance $ 5,800 Charged to the job during May Direct materials $ 9,100 Direct labor $ 2,800 Manufacturing overhead applied $ 4,800 Units completed 180 Units in process at the end of May 0 Units sold during May 80 In May, overhead was overapplied by $380. The company adjusts its cost of goods sold every month for the amount of the overhead that was underapplied or overapplied. Required: 1. Using the direct method, what is the cost of goods sold for May?

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  1. 21 November, 10:33
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    Cost of goods sold is $9,620

    Explanation:

    First step prepare the Cost of Goods Manufactured Account

    Direct materials $ 9,100

    Direct labor $ 2,800

    Manufacturing overhead applied $ 4,800

    Total Manufacturing Costs $16,700

    Add Opening Work In Process $ 5,800

    Less Closing Work In Process $ 0

    Cost of Goods Manufactured $22,500

    Next we need to calculate the cost of goods sold as follows:

    Opening Finished Goods Inventory $0

    Add Cost of Goods Manufactured $22,500

    Less Closing Finished Goods Inventory ($12,500)

    Cost of goods sold $10,000

    Less Over-applied Overheads ($380)

    Adjusted Cost of goods sold $9,620

    Finished Goods Inventory = $22,500 * 100/180

    = $12,500

    Thus Cost of goods sold is $9,620
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