Question

Cienfuegos Corporation has provided the following data concerning last month’s operations.

Purchases of raw materials	$	36,000
Indirect materials included in manufacturing overhead	$	4,000
Direct labor cost	$	58,000
Manufacturing overhead applied to Work in Process	$	90,000
Overapplied overhead	$	3,000

	Beginning			Ending
Raw materials inventory	$	10,000		$	21,000
Work in process inventory	$	62,000		$	70,000
Finished goods inventory	$	36,000		$	40,000

The company closes out any underapplied or overapplied manufacturing overhead to cost of goods sold. How much is the adjusted cost of goods sold on the Schedule of Cost of Goods Sold?

Multiple Choice

$157,000

$154,000

$161,000

$197,000

Answer 1

• Correct Answer = Option #2: $ 154,000 = Adjusted Cost of Goods Sold
• Working

Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw material inventory	$10,000
Add: Purchase of raw material	$36,000
Total raw materials available	$46,000
Less: Ending raw material inventory	$21,000
Raw material used in production	$25,000
Less: Indirect materials	$4,000	$21,000
Direct labor cost		$58,000
Manufacturing Overhead applied		$90,000
Total manufacturing costs		$169,000
Add: Beginning WIP Inventory		$62,000
Total cost of Work in Process		$231,000
Less: Ending WIP Inventory		$70,000
Cost of Goods manufactured		$161,000

Schedule of Cost of Goods Sold
Befinning Finished Goods Inventory	$36,000
Add: Cost of Goods manufactured	$161,000
Cost of Goods available for sale	$197,000
Less: Ending finished goods inventory	$40,000
Unadjusted Cost of Goods Sold	$157,000
Less: Over applied Overheads	$3,000
Cost of Goods Sold [adjusted]	$154,000 = Answer