Question

Hubley Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month. The company has provided the following data for August:

Direct materials	$	59,000
Direct labor cost	$	91,000
Manufacturing overhead cost incurred	$	62,000
Manufacturing overhead cost applied	$	66,000

Inventories:	Beginning	Ending
Work in process	$14,000	$16,000
Finished goods	$52,000	$33,000

The cost of goods sold that appears on the income statement for August and that has been adjusted for any underapplied or overapplied overhead is closest to:

$237,000

$233,000

$229,000

$214,000

Answer 1

Direct Material
To	Opening	$                            -	By	Transfer
To	Direct Material purchases	$             59,000.00		WIP inventory	$            59,000.00
				Closing	$                           -
		$             59,000.00			$            59,000.00
Direct Labour
To	Opening	$                            -	By	Transfer
To	Direct labour cost incurred	$             91,000.00		WIP inventory	$            91,000.00
				Closing	$                           -
		$             91,000.00			$            91,000.00
Manufacturing overhead
To	Opening	$                            -	By	Applied to
To	Manufacturing cost incurred	$             62,000.00		WIP inventory	$            66,000.00
To	Over-applied t/f		By	Under-applied t/f
	Cost of good sold	$               4,000.00		Cost of good sold
				Closing	$                           -
		$             66,000.00			$            66,000.00
WIP Inventory
To	Opening	$             14,000.00	By	Transfer
To	Direct Material	$             59,000.00		Finished goods	$          214,000.00
To	Direct Labour	$             91,000.00
To	Manufacturing overhead	$             66,000.00
				Closing	$            16,000.00
		$           230,000.00			$          230,000.00
Finished Good
To	Opening	$             52,000.00	By	Transfer to
To	Transfer from			-Cost of good sold	$          233,000.00
	-WIP inventory	$           214,000.00
				Closing	$            33,000.00
		$           266,000.00			$          266,000.00
Cost of good sold
To	Opening	$                            -
To	Transfer from		By	Over-applied overhead	$              4,000.00
	-Finished good	$           233,000.00	By	Transfer to
				Income Statement	$          229,000.00
		$           233,000.00			$          233,000.00

The cost of goods sold that appears on the income statement for August and that has been adjusted for any underapplied or overapplied overhead is closest to: $229,000

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