Question

X Company's beginning and ending inventories for the month of November were as follows: November 1 November 30 Raw Materials $60,000 $58,000 Work in Process $125,000 $180,000 Finished Goods $50,000 $75,000 Production data for month follow: Direct labor cost incurred Actual manufacturing overhead cost incurred Raw materials purchased (all direct) $200,000 $125,000 $152,000 X applies manufacturing overhead cost to jobs at the rate of 80% of direct labor cost incurred. X Company had the following additional information for November: Administrative salaries, $110,000; Selling costs, $90,000; Selling, general, and administrative related depreciation of $5,000 and Sales of $550,000. Calculate the following total manufacturing cost a) Total manufacturing cost b) Cost of Goods Manufactured c) Cost of Goods sold d) Net Operating Income

Answer 1

Direct labor = $200,000

Manufacturing overhead rate 80% of direct labor cost incurred.

Manufacturing overhead applied= 200,000 x 80%

= $160,000

Actual manufacturing overhead incurred = $125,000

Over applied manufacturing overhead = Manufacturing overhead applied- Actual manufacturing overhead incurred

= 160,000-125,000

= $35,000

Schedule of Cost of Goods Manufactured
Raw materials beginning	60,000
Add:Direct materials purchases	152,000
Raw Material available for use	212,000
Less:Ending raw material inventory	-58,000
Raw material used		154,000
Direct labor		200,000
Manufacturing Overheads applied		160,000
Total Manufacturing Cost		$514,000
Add :Work in process inventory, beginning		125,000
Less: Work in process inventory, ending		-180,000
Cost of goods manufactured		$459,000

(a) Total manufacturing cost = $514,000

(b) Cost of goods manufactured = $459,000

(c)

Schedule of Cost of Goods Sold
Finished goods inventory, beginning	50,000
Cost of goods manufactured	459,000
Cost of goods available for sale	509,000
Finished goods inventory, Ending	-75,000
Unadjusted Cost of goods sold	434,000
Over applied manufacturing overhead	-35,000
Adjusted Cost of goods sold	$399,000

Cost of goods sold = $399,000

(d)

Income Statement
Sales		550,000
Cost of goods sold		-399,000
Gross profit		151,000
Expenses:
Administrative salaries	110,000
Selling costs	90,000
Selling, general, administrative related depreciation	5,000
Total expenses		-205,000
Net operating loss		($54,000)

Net operating Loss = $54,000

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