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Maxxon Fixures Company's follows a job-order costing system. The manufacturing
overhead is applied to Work in Process inventory using a predetermined overhead
rate. The company had no beginning or ending inventories in the current month. During
the month, the company’s transactions included the following:
|
Manufacturing
overhead incurred
|
$1,000,000
|
|
Manufacturing
overhead applied
|
904,000
|
|
Direct
labor incurred
|
856,000
|
|
Direct
materials issued to production
|
720,000
|
|
Indirect
materials issued to production
|
64,000
|
Part (a) What was the cost of goods
manufactured?
Part (b) What was
the amount of cost of goods sold?
Part
(a) The cost of goods manufactured for the month would be determined as
follows:
|
Work
in process, beginning of period
|
$ 0
|
|
Direct
materials issued to production
|
720,000
|
|
Direct
labor cost incurred
|
856,000
|
|
Manufacturing
overhead cost applied
|
904,000
|
|
Total
manufacturing costs
|
2,480,000
|
|
Less:
work in process, end of period
|
(0)
|
|
Cost
of goods manufactured
|
$2,480,000
|
|
|
|
Part (b) First, determine
whether overhead was underapplied or overapplied as follows:
|
Actual
overhead costs
|
$1,000,000
|
|
Overhead
costs applied to production
|
904,000
|
|
Amount
of underapplied overhead
|
$ 96,000
|
|
|
|
Then, determine the cost of
goods sold as follows:
|
Finished
goods, beginning of period
|
$ 0
|
|
Add:
Cost of goods manufactured
|
2,480,000
|
|
Cost
of goods available for sales
|
2,480,000
|
|
Less:
finished goods, end of period
|
0
|
|
Unadjusted
cost of goods sold
|
2,480,000
|
|
Add:
Underapplied overhead
|
96,000
|
|
Adjusted
cost of goods sold
|
$2,596,000
|
|
|
|
