Hubley Inc. uses a job-order costing system in which any underapplied or overapp

Question

Hubley Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month.

The company has provided the following data for August:

Direct materials $ 74,500

Direct labor cost S 110,500

Manufacturing overhead cost incurred $ 72,300

Manufacturing overhead cost applied $ 77,350

Inventories: Beginning Work in process $19,000

Ending work in process $21,575

Finished goods beginning $62,050

ending $40,500

The cost of goods sold that appears on the income statement for August and that has been adjusted for any underapplied or overapplied overhead is closest to:

a. $276,275

b. $286,375

c. $259,775

d. $281,325

Explanation / Answer

Total manufacturing cost = 74500+110500+77350 = 262350

Cost of goods manufactured = 262350+19000-21575 = 259775

Unadjusted Cost of goods sold = 259775+62050-40500 = 281325

Overapplied overhead = 77350-72300 = 5050

Adjusted cost of goods sold = 281325-5050 = $276275

So answer is a) $276275

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