Question

Beehive Corporation incurred actual overhead of $201,600 and applied overhead of $210,000. Beehive has supplied the following data relating to its inventories: Jan. 1 Dec. 31 Direct materials $42,000 $56,000 Work-in-process 21,000 28,000 Finished goods 91,000 70,000 If cost of goods manufactured was $721,000, what would cost of goods sold be, assuming under- or overapplied overhead is allocated to inventories and cost of goods sold

Answer 1

Answer:

$713,605

Explanation:

If Actual Overheads > Applied Overhead we say, Overheads have been underapplied and the amount of underapplied overheads is added to the balance in stock and cost of sales.

and

If Applied Overheads > Actual Overhead we say, Overheads have been overapplied and the amount of overapplied overheads is deducted from the balance in stock and cost of sales.

Where :

Actual overhead is  $201,600 and Applied overhead is $210,000, the amount of overapplied overhead is $8,400 ($210,000 - $201,600).

The overapplied overheads is allocated to ending balances of Finished Goods, Work In Process and Cost of Sales only and except Direct Materials

                                    Total         %           Allocation

Work-in-process     $28,000     3.41              $286

Finished goods      $70,000     8.55              $718

Cost of goods       $721,000    88.03          $7,395

Total                       $819,000   100.00         $8,400

Therefore,

Cost of goods sold = $721,000 - $7,395 = $713,605