Morton Inc. 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 $49,000 and at the end of the month was $45,000. The cost of goods manufactured for the month was $226,000. The actual manufacturing overhead cost incurred was $74,000 and the manufacturing overhead cost applied to Work in Process was $70,000. The adjusted cost of goods sold that would appear on the income statement for November is:
A) $226,000.
B) $230,000.
C) $222,000.
D) $234,000.

Question

Quizplus · Accepted Answer

The cost of goods sold is calculated as: Beginning Finished Goods Inventory ($49,000) + Cost of Goods Manufactured ($226,000) - Ending Finished Goods Inventory ($45,000) = Unadjusted Cost of Goods Sold ($230,000). Since the actual manufacturing overhead ($74,000) is more than the applied overhead ($70,000), the cost of goods sold needs to be adjusted by adding the underapplied overhead ($4,000), resulting in an adjusted cost of goods sold of $234,000.