Question

Tusa Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Estimated total manufacturing overhead at the beginning of the year $638,250 Estimated direct labor-hours at the beginning of the year 37,000 direct labor-hours Results of operations: Actual direct labor-hours 34,000 direct labor-hours Manufacturing overhead: Indirect labor cost $ 148,000 Other manufacturing overhead costs incurred $ 450,000 Cost of goods manufactured $ 1,611,000 Cost of goods sold (unadjusted) $ 1,518,000 The adjusted Cost of Goods Sold for the year is:

Answer 1

Answer:

adjusted COGS    1,529,500

Explanation:

The first step, is to determinate the overhead rate

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

expected overhead 638,250

the company uses direct labor hour as a cost driver

labor hours expected 37,000

rate = 638,250/37,000 = 17.25

Second, we calculate the applied overhead

actual labor hours x rate

34,000 x 17.25 = 586,500

Third, we check the actual overhead

indirect labor        148,000

other cost              450,000

actual overhead    598,000

We now compare for overapplied or underapplied

586,500 - 598,000 = -11,500

The actual cost were higher, we applied less overhead

So we need to increase the cost of good sold, because the inventory sold cost was 11,500 higher than we think.

cost of goods sold 11,500

   factory overhead            11,500

COGS                    1,518,000

+adjustment               11,500  

adjusted COGS    1,529,500