Question

17 Superior Company provided the following data for the year ended December 31. Superior closes any under-or over-applied overhead costs to cost of goods sold at the end of the year. Selling and administrative expense Sales Actual manufacturing overhead cost Total manufacturing cost for the year Cost of goods manufactured Direct labor cost Net operating income (after adjustment) Finished goods (beginning balance) Finished goods (ending balance) S 12,000 $ 87,000 $ 19,000 $ 45,000 $ 37,000 $ 10,000 $ 42,000 S 3,000 $ 15,000 What is the cost of direct materials used during the year? A $ 26,000 B. $ 24,000 C. $ 10,000 D. S 8,000 E. None of the above

Answer 1

Cost of goods manufactured	37000
(+) Beginning finished goods	3000
(-) Ending finished goods	15000
Cost of goods sold before adjustment	25000
Sales	87000
(-) Cost of goods sold before adjustment	25000
(-) Selling and administrative expense	12000
Net operating income before adjustment	50000

Net operating income after adjustment	42000
As the net operating income after adjustment is lower than the net operating income before adjustment, there is a underapplied overhead that is closed to cost of goods sold
Underapplied overhead = Net operating income before adjustment - Net operating income after adjustment = 50000 - 42000	8000
Applied manufacturing overhead cost = Actual manufacturing overhead cost - Underapplied overhead = 19000 - 8000	11000

Total manufacturing cost for the year	45000
(-) Direct labor cost	10000
(-) Applied manufacturing overhead cost	11000
Cost of direct materials used during the year	24000	Option B