Question

Luebke Incorporated has provided the following data for the month of November. The balance in the Finished Goods inventory account at the beginning of the month was $52,000 and at the end of the month was $30,000. The cost of goods manufactured for the month was $212,000. The actual manufacturing overhead cost incurred was $55,000 and the manufacturing overhead cost applied to Work in Process was $58,000. The company closes out any underapplied or overapplied manufacturing overhead to cost of goods sold. The adjusted cost of goods sold that would appear on the income statement for November is: 0 $231,000 $190,000 $234,000 $212,000

Answer 1

Cost of goods sold = Opening finished goods + Cost of goods manufactured - Ending inventory of finished goods

= 52000 + 212000 - 30000

= 234000

The overhead applied to work in process was 58000 whereas the actual overhead was 55000 only. The actual overhead is less than applied overhead and hence this would understate the cost of goods sold

Adjusted cost of goods sold = 234000 + (55000 - 58000)

= 231000

Correct choice A