Gest Inc. has provided the following data for the month of November. The balance
ID: 2902736 • Letter: G
Question
Gest Inc. has provided the following data for the month of November. The balance in the Finished Goods inventory account at the beginning of the month was $49,000 and at the end of the month was $45,000. The cost of goods manufactured for the month was $226,000. The actual manufacturing overhead cost incurred was $74,000 and the manufacturing overhead cost applied to Work-in-Process was $70,000. The adjusted cost of goods sold that would appear on the income statement for November is?
226,000
230,000
222,000
234,000
Explanation / Answer
The cost of goods sold is computed as
Beginning finished goods $49,000
(+) Cost of goods manufactured $226,000
------------------------------------------------------------
Goods available for sale $275,000
(-) Ending finished goods $45,000
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Cost of goods sold $230,000
-------------------------------------------------------------
The manufacturing overhead is overapplied by $4,000( = $74,000 - $70,000)
This amount should be deducted from cost of goods sold
$230,000 - $4,000 = $226,000
Therefore, the correct option is (A)
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