Question

Reith Inc. has provided the following data for the month of November. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month. Direct materials Direct labor Manufacturing overhead applied Total Work In Process $1,850 3,510 1,560 $6,920 Finished Goods $10,440 22,620 7,800 $40,860 Cost of Goods Sold $ 58,560 126,880 42,640 $228,080 Total $ 70,850 153,010 52,000 $275,860 Manufacturing overhead for the month was overapplied by $4,000. The company allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts. The cost of goods sold for November after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to: Multiple Choice O $232,080 $231,360 $224,080 0 $224,800

Answer 1

1) Cost of goods sold balance after allocation

Cost of goods sold before allocation = 228080

Prorated over applied overhead = 4000/52000*42640 = 3280

Cost of goods sold after allocation = 228080-3280 = 224800

So answer is d) $224800

2) When applied overhead is higher than actual manufacturing overhead than it is called over applied overhead

So answer is c) Manufacturing overhead cost incurred were less than manufacturing overhead costs charged to production