Question

Nizar Inc. has provided the following data for the month of July. The balance in the Finished Goods inventory account at the beginning of the month was Rs. 50,000 and at the end of the month was Rs. 40,000. The cost of goods manufactured for the month was Rs. 220,000. The actual manufacturing overhead cost incurred was 75,000 and the manufacturing overhead cost applied to Work in Process was Rs. 70,000. The adjusted cost of goods sold that would appear on the income statement for July is?

Answer 1

Cost of goods sold (COGS): The cost of goods sold budget shows the expenses incurred for producing a product. The cost of goods sold is a manufacturing expense that a company incurs when finished inventory is sold. It includes direct materials, direct labor, and budgeted manufacturing overhead.

Particulars

Amount ($)

Beginning finished goods Inventory

50,000

Add : Cost of goods manufactured

220,000

Less : Ending finished goods Inventory

(40,000)

Cost of goods sold before adjustment

230,000

Add : Manufacturing overhead underapplied ($75,000 - $70,000)

5,000

Adjusted cost of goods sold

235,000

Particulars	Amount ($)
Beginning finished goods Inventory	50,000
Add : Cost of goods manufactured	220,000
Less : Ending finished goods Inventory	(40,000)
Cost of goods sold before adjustment	230,000
Add : Manufacturing overhead underapplied ($75,000 - $70,000)	5,000
Adjusted cost of goods sold	235,000