Question

Nagle 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. In October the company completed job O43G that consisted of 15,000 units of one of the company's standard products. No other jobs were in process during the month. The job cost sheet for job O43G shows that the total cost for the job was $836,250. During the month, the actual manufacturing overhead cost incurred was $204,880 and the manufacturing overhead cost applied to job O43G was $221,600. Also during the month, 9,000 completed units from job O43G were sold. No other products were sold. The cost of goods sold that would appear on the income statement for October is closest to:
A. $819,530
B. $836,250
C. $518,470
D. $485,030

Answer 1

Answer:

D. $485,030

Explanation:

Total manufacturing cost for the job = $836,250

Total number of units produced 15,000

Unit product cost $55.75

Manufacturing overhead cost applied

$221,600

Actual manufacturing overhead cost $204,880

Over applied overhead $16,720

The direct method of determining cost of goods sold

Unadjusted cost of goods sold

(9,000 units × $55.75 per unit)

$501,750

Less over applied overhead

($16,720)

Cost of goods sold $485,030