In the Vasquez Corporation, any overapplied or underapplied manufacturing overhead is closed out to Cost of Goods Sold. Last year, the Corporation incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of manufacturing overhead cost to jobs. The beginning and ending balances of Finished Goods were equal, and the Corporation's Cost of Goods Manufactured for the year totaled $71,000. Given this information, Cost of Goods Sold, after adjustment for any overapplied or underapplied manufacturing overhead, for the year must have been:

A) $98,000
B) $73,000
C) $71,000
D) $69,000

Question

Ashley Adrianna · Accepted Answer

Final Answer : D, Explanation :  To calculate Cost of Goods Sold, we need to start with Cost of Goods Manufactured and adjust for any changes in Finished Goods inventory. We are told that the beginning and ending balances of Finished Goods were equal, so there is no adjustment necessary for changes in Finished Goods inventory.Cost of Goods Sold = Cost of Goods Manufactured +/- Adjustment for Finished GoodsCost of Goods Manufactured = Direct Materials + Direct Labor + Manufacturing Overhead Applied = $71,000 (given)Manufacturing Overhead Applied = $29,000 (given)Actual Manufacturing Overhead Cost = $27,000 (given)Since applied overhead exceeded actual overhead, we know that there was an overapplied amount.Overapplied Manufacturing Overhead = Applied Manufacturing Overhead - Actual Manufacturing Overhead = $29,000 - $27,000 = $2,000To adjust Cost of Goods Manufactured for this overapplied amount, we subtract it from Cost of Goods Sold:Cost of Goods Sold = Cost of Goods Manufactured - Overapplied Manufacturing OverheadCost of Goods Sold = $71,000 - $2,000 = $69,000Therefore, the answer is D: $69,000.

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