Company has underapplied overhead of $50,000 for the year. Before the dispostion

Question

Company has underapplied overhead of $50,000 for the year. Before the dispostion of the underapplied overhead, selected year end balance from the company accounting records were

Sales $1,200,000

COGS $720,000

DM Inventory $36,000

WIP Inventory $54,000

FG Inventory $90,000

Under the company cost accounting system, over or under-applied overhead is assigned to appropriate inventories and COGS baed on year-end balances. In its year-end income statement, the company should report COGS of ?

Please show work explain the answer . Thank you

Explanation / Answer

Under applied overhead assigned to appropriate inventory and COGS

so COGS is (720000+41667) = 761667

WIP inventory 50000*54000/864000 3125 FG inventory 50000*90000/864000 5208 COGS 50000*720000/864000 41667

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