Question

1. The Precision Widget Company had the following balances in their accounts at the end of the accounting period:

Work in Process Inventory	$45,000
Finished Goods Inventory	$67,500
Cost of Goods Sold	$112,500

Given the company’s manufacturing overhead was overallocated by $8,000 and Precision Widget adjusts for this overallocation in their accounts using a proration based on total ending balances in Work in Process, Finished Goods, and Cost of Goods Sold,

1. Calculate the following adjusted balances:

Account	Adjusted Balance
Work in Process Inventory
Finished Goods Inventory

2. Given sales revenue of $300,000, what is the company’s gross profit reported on the Income Statement?

Answer 1

a. Calculate the adjusted balances as follows:

Above figures have been calculated in the following manner:

b. Calculate the company's gross profit as follows:

Sales revenue	$300,000
Less: Adjusted cost of goods sold	$108,500
Gross profit	$191,500