Question

Tondre Inc. has provided the following data for the month of July: Direct materials $34,000 Direct labor cost $52,000 Manufacturing overhead cost incurred $72,000 Manufacturing overhead cost applied to Work in Process $74,000 In addition, the beginning balance of work in process inventory (WIP) is $30,000 and the ending balance of WIP is $20,000. The beginning balance of Finished goods is $46,000 and the ending balance of finished goods is $33,000. The cost of goods sold that appears on the income statement for July and that has been adjusted for any underapplied or overapplied overhead is closest to:

Answer 1

Answer:

overapplied overhead

$181,000

Explanation:

Prime cost:

= Direct labor cost + Direct materials

= $52,000 + $34,000

= $86,000

Works cost:

= Prime cost + Manufacturing overhead cost applied

= $86,000 + $74,000

= $160,000

Cost of production:

= Works cost + Opening work in process - Ending work in process

= $160,000 + $30,000 - $20,000

= $170,000

Cost of goods sold:

= Cost of production + Opening finished goods - Ending finished goods

= $170,000 + $46,000 - $33,000

= $183,000

Manufacturing overhead cost incurred = $72,000

Overhead is over applied.

Therefore,

Cost of goods sold:

= Cost of goods sold - Manufacturing overhead cost applied + Manufacturing overhead cost incurred

= $183,000 - $74,000 + $72,000

= $181,000