Question

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Crunchem Cereal Company incurred the following actual costs during 20x1.

Direct material used	$	285,000
Direct labor		130,000
Manufacturing overhead		273,000

The firm’s predetermined overhead rate is 210 percent of direct-labor cost. The January 1 inventory balances were as follows:

Raw material	$	30,000
Work in process		40,000
Finished goods		43,000

Each of these inventory balances was 10 percent higher at the end of the year.

2. What was the cost of goods sold for the year?

Answer 1

Computation of cost of goods sold;
	$	$
Beginning inventory of raw material	30,000
Add: Direct material used	285,000
Less: Ending inventory ( $ 30,000 x 1.1)	(33,000)
Direct Material consumed		282,000
Direct labor		130,000
Applied manufacturing overhead ( $ 130,000 x 210%)		273,000
Add: beginning inventory of work in process		40,000
Less: Ending inventory of work in process ( $ 40,000 x 110%)		(44,000)
Cost of goods manufactured		681,000
Add: beginning inventory of finished goods		43,000
Cost of goods available for sale		724,000
Less: Ending inventory of finished goods ( $ 43,000 x 110%)		(47,300)
Cost of goods sold ( before adjustments)		676,700
add/(less): underapplied/overapplied overhead		-
Cost of goods sold ( after adjustments)		676,700