Question

The following costs are attributed to the Quilt Company:

Purchase of raw materials (all direct)	$297,100
Direct labour cost	$141,800
Manufacturing overhead costs	$175,260
Inventories:
Beginning raw materials	$10,000
Ending raw materials	$5,000
Beginning work in process	$20,000
Ending work in process	$10,800
Beginning finished goods	$20,000
Ending finished goods	$4,800

Quilt Company used a 120% predetermined overhead rate based on direct labour cost.

Required:

1. Calculate the cost of goods manufactured.
2. What was the cost of goods sold before adjusting for any under or over applied overhead?
3. By how much was manufacturing overhead cost under or over applied?
4. Would the summary journal entry to close any under or over applied manufacturing overhead cost be a debit or credit to COGS?

Answer 1

1.

Schedule of cost goods manufactured
Direct materials:
Raw materaials inventory, beginning	$10,000
Add: purchase of raw materials	$2,97,100
Total raw materials available	$3,07,100
Deduct: Raw materials inventory, ending	$5,000	$3,02,100
Direct Labor		$1,41,800
Manufacturing overhead applied to work in process		$1,70,160
Total manufacturing costs		$6,14,060
Add: beginning work in process inventory		$20,000
Total cost of work in process		$6,34,060
Deduct ending work in process inventory		$10,800
Cost of goods manufactured		$6,23,260

2.

Schedule of cost of goods sold
Finished goods inventory beginning	$20,000
Add: cost of goods manufactured	$6,23,260
Costs of goods available for sale	$6,43,260
Deduct: finished goods inventory, ending	$4,800
Unadjusted cost of goods sold	$6,38,460

3.

Actual manufacturing overhead cost	$1,75,260
manufacturing overhead applied	$1,70,160
underapplie manufacturing overhead	$5,100

4.

Journal Entry to close the balance in Manufacturing Overhead
Cost of Goods sold	$5,100
Manufacturing Overhead		$5,100

It would be a debit to COGS