John's Water Slides makes custom water slides for hotels. On September 1, there were three jobs...

John's Water Slides makes custom water slides for hotels. On September 1, there were three jobs in process, Jobs 812, 813, and 814. Two more jobs were started during September, Jobs 815 and 816. By September 30, Jobs 812, 814, and 816 were finished. The following data has been collected:

	Job 812	Job 813	Job 814	Job 815	Job 816
9/1 Balance	$615	$830	$945	---	---
Direct materials	750	235	1,280	$200	$915
Direct labor	420	115	560	320	875

Overhead is applied at the rate of 120% of direct labor cost. Jobs are sold at cost plus 60%. Selling and administrative expenses for September totaled $2,950. By September 30, Jobs 812 were 816 are sold, but the customer who ordered Job 814 decided he did not want the slide so it is still in the warehouse.

What is the cost of goods sold for September?

	a.	$8,586
	b.	$5,129
	c.	$5,720
	d.	$8,206.40
	e.	$3,575

Expert Solution

For calculating the cost of goods sold, we will first calculate cost of goods manufactured. The cost of goods manufactured is accounted as follows:

Amounts (in $)

	Job 812	Job 813	Job 814	Job 815	Job 816	Total
Direct Materials	750	235	1,280	200	915	3,380
Direct Labour	420	115	560	320	875	2,290
Overhead	504	138	672	384	1,050	2,748
Total added	1674	488	2,512	904	2,840	8,418
	Job 812	Job 813	Job 814	Job 815	Job 816	Total
Beginning WIP	615	830	945	0	0	2,390
Materials, Labor & OH	1,674	488	2,512	904	2,840	8,418
Manufacturing costs	2,289	1,318	3,457	904	2,840	10,808
Ending WIP	0	1,318	0	904	0	2,222
Cost of goods manufactured	2,289	0	3,457	0	2,840	8,586

Job 813 & Job 815 are included in the work in process inventory while Job 812, 815 & 816 are transferred to the cost of goods manufactured. The cost of the jobs transferred are shown in cost of goods sold and the finished goods inventory:

Amounts ( in $ )
	Job 812	Job 813	Job 814	Job 815	Job 816	Total
Beginning finished goods inventory	0	0	0	0	0	0
Cost of goods manufactured	2,289	0	3,457	0	2,840	8,586
Goods available for sale	2,289	0	3,457	0	2,840	8,586
Ending FG inventory	0	0	3,457	0	0	3,457
Cost of goods sold	2,289	0	0	0	2,840	5,129

Hence, cost of goods sold for September is option b. i.e. $5,129.

ekkarill92 answered 1 year ago

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