Question

Cerrone Inc. has provided the following data for the month of July. The balance in the Finished Goods inventory account at the beginning of the month was $79,000 and at the end of the month was $72,000. The cost of goods manufactured for the month was $361,600. The actual manufacturing overhead cost incurred was $118,400 and the manufacturing overhead cost applied to jobs was $112,000. The adjusted cost of goods sold that would appear on the income statement for July is:

Answer 1

Answer:

$375,000

Explanation:

Unadjusted cost of goods sold = Opening stock of finished goods  + Cost of goods sold - Closing stock of finished goods

Unadjusted cost of goods sold = $79,000 + $361,600 - $72,000

Unadjusted cost of goods sold = $368,600

The overhead applied is $112,000 and the actual manufacturing overhead is $118,400. As the actual manufacturing overhead is more than the overhead applied, the overhead is under applied as shown below

Under-applied Overhead = Actual manufacturing overhead - Overhead applied

= $118,400 - $112,000

= $6,400

Now, calculation of the adjusted cost of goods sold is as follow

Adjusted cost of goods sold = Unadjusted cost of goods sold + Under-applied Overhead

= $368,600 + $6,400

= $375,000

Thus, the adjusted cost of goods sold is $375,000