Question

Christine Corp. applies manufacturing overhead to production at 90% of direct labor cost. During the year ended 20xx, manufacturing overhead of $225,180 was applied to production; actual manufacturing overhead was $188,600. Beginning Work in Process Inventory was $23,100, and beginning Finished Goods Inventory was $44,700. Work in Process Inventory decreased by 25% during the year and Finished Goods Inventory decreased by 20% during the year. Adjusted Cost of Goods Sold was $623,200 for the year ended 20xx. Complete the following schedule: Item Amount Direct Materials used in Production Direct Labor Manufacturing Overhead Applied Current Manufacturing Costs Beginning Work in Process Inventory Ending Work in Process Inventory Cost of Goods Manufactured Beginning Finished Goods Inventory Ending Finished Goods Inventory Unadjusted Cost of Goods Sold Overhead Adjustment Adjusted Cost of Goods Sold

Answer 1

Item	Amount ($)	Calculations
Direct Materials Used in Production	1,99,115	Note 7
Direct Labour	2,50,200	Note 6
Manufacturing Overhead Applied	2,25,180	Given
Current Manufacturing Costs	6,74,495	Note 5
Beginning Work in Process Inventory	23,100	Given
Ending Work in Process Inventory	17,325	Note 1
Cost of Goods Manufactured	6,68,720	Note 4
Beginning Finished Goods Inventory	44,700	Given
Ending Finished Goods Inventory	35,760	Note 2
Unadjusted Cost of Goods Sold	6,59,780	Note 3
Overhead Adjustment	36,580	Note 3
Adjusted Cost of Goods Sold	6,23,200	Given

Note 1: Ending Work in Process Inventory

Decreased by 25%

Ending Work in Process Inventory = $23,100 * 75% = $17,325

Note 2: Ending Finished Goods Inventory

Decreased by 20%

Ending Finished Goods Inventory = $44,700 * 80% = $35,760

Note 3: Overhead Adjustment

Manufacturing Overheads Applied = $225,180

Actual Manufacturing Overhead = $188,600

Overapplied Overheads = Manufacturing Overheads Applied – Actual Manufacturing Overheads = $225,180 - $188,600 = $36,580

Adjusted Cost of Goods Sold = Unadjusted Cost of Goods Sold – Overapplied Overheads

Thus, Unadjusted Cost of Goods Sold = Adjusted Cost of Goods Sold + Overapplied Overheads

Unadjusted Cost of Goods Sold = $623,200 + $36,580 = $6,59,780

Note 4: Cost of Goods Manufactured

Cost of Goods Manufactured = Unadjusted Cost of Goods Sold – Ending Finished Goods Inventory + Beginning Finished Goods Inventory = $659,780 - $35,760 + $44,700 = $668,720

Note 5: Current Manufacturing Costs

Current Manufacturing Costs = Cost of Goods Manufactured – Ending Work in Process Inventory + Beginning Work in Process Inventory = $668,720 -$17,325 + $23,100 = $6,74,495

Note 6: Direct Labour Cost

Christine Corp. applies manufacturing overhead to production at 90% of Direct Labour Cost

Manufacturing Overheads Applied = Direct Labour Cost * 90%

Thus, $225,180 = Direct Labour Cost * 90%

Direct Labour Cost = $225,180 * 100/90 = $250,200

Note 7: Direct Materials Used in Production

Direct Materials Used in Production = Current Manufacturing Costs – Direct Labour – Manufacturing Overhead Applied = $674,495 - $250,200 - $225,180 = $199,115