Adjusted cost of good sold ———-? The following information applies to the questi

Question

Adjusted cost of good sold ———-? The following information applies to the questions displayed below Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows Raw materials 40,000 ork in process $ 18,000 Finished goods 35,000 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the companys predetermined overhead rate of $16.25 per direct labor-hour was based on a cost formula that estimated $650,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year: a. Raw materials were purchased on account, $510,000. b. Raw materials used in production, $480,000. All of of the raw materials were used as direct materials c. The following costs were accrued for employee services: direct labor, $600,000, indirect labor, $150,000, selling and administrative salaries, $240,000. d. Incurred various selling and administrative expenses (e.g. advertising, sales travel costs, and finished goods warehousing). $367,000. e. Incurred various manufacturing overhead costs (e.g. depreciation, insurance, and utilities), $500,000. f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year g. Jobs costing $1,680,000 to manufacture according to their job cost sheets were completed during the year h. Jobs were sold on account to customers during the year for a total of $2,800,000. The jobs cost $1,690,000 to manufacture according to their job cost sheets

Explanation / Answer

Solution:

Total manufacturing overhead incurred = Indirect labor + Other manufacturing overhead

= $150,000 + $500,000 = $650,000

Manufacturing overhead applied = 41000 * $16.25 = $666,250

Overapplied overhead = $666,250 - $650,000 = $16,250

Unadjusted cost of goods sold = $1,690,000

Adjusted cost of goods sold = Unadjusted cost of goods sold - Overapplied overhead

= $1,690,000 - $16,250 = $1,673,750

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