Luebke Incorporated has provided the following data for the month of November. The balance in the Finished Goods inventory account at the beginning of the month was $70,000 and at the end of the month was $31,800. The cost of goods manufactured for the month was $221,000. The actual manufacturing overhead cost incurred was $60,400 and the manufacturing overhead cost applied to Work in Process was $65,200. The company closes out any underapplied or overapplied manufacturing overhead to cost of goods sold. The adjusted cost of goods sold that would appear on the income statement for November is:

A) $254,400
B) $182,800
C) $259,200
D) $221,000

Question

Shaiful Amin 23-204 · Accepted Answer

Final Answer : A, Explanation :  The adjusted cost of goods sold is equal to the cost of goods manufactured plus the underapplied or minus the overapplied manufacturing overhead. In this case, the manufacturing overhead was underapplied by $4,800 ($65,200 - $60,400). Therefore, the adjusted cost of goods sold is $221,000 + $4,800 = $225,800. However, the ending balance in the Finished Goods inventory account is $31,800, which is lower than the beginning balance of $70,000. This means that the cost of goods sold must be increased by the amount of the decrease in the Finished Goods inventory account, which is $38,200 ($70,000 - $31,800). Therefore, the adjusted cost of goods sold is $225,800 + $38,200 = $254,400.

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