The following accounts are from last year's books at Sharp Manufacturing: Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs.What is the amount of cost of goods manufactured for the year?
A)$252,000
B)$454,000
C)$510,000
D)$460,000

Question

The following accounts are from last year's books at Sharp Manufacturing:      Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs.What is the amount of cost of goods manufactured for the year?
A)$252,000 
B)$454,000 
C)$510,000 
D)$460,000

Quizplus · Accepted Answer

To calculate the cost of goods manufactured, we need to add up the total manufacturing costs (direct materials used, direct labor, and manufacturing overhead applied) and subtract the ending balance of the Work in Process (WIP) account from the beginning balance. However, we are not given the direct materials used or the beginning and ending balances of the WIP account. Therefore, we can only rely on the information given, which is the manufacturing overhead applied based on direct labor costs.

Based on the accounts provided, we can determine the total direct labor costs for the year by adding up the direct labor costs for each job:

11ea7998_5efd_746a_911b_2b3ccaa80e93_TB2627_00_TB2627_00: $25,000
11ea7998_5efd_9b7b_911b_7b5f5ab1009b_TB2627_00_TB2627_00: $40,000
11ea7998_5efd_9b7c_911b_d3b366e78ca9_TB2627_00_TB2627_00: $60,000
11ea7998_5efd_c28d_911b_e789a74bc2d2_TB2627_00_TB2627_00: $50,000
11ea7998_5efd_e99e_911b_cf76d11b2cc7_TB2627_00_TB2627_00: $80,000

Total direct labor costs = $255,000

Since Sharp applies manufacturing overhead based on direct labor costs, we also know that the total manufacturing overhead applied for the year is $153,000 (60% of total direct labor costs).

To calculate the total manufacturing costs, we can use the following formula:

Total Manufacturing Costs = Direct Materials Used + Direct Labor + Manufacturing Overhead Applied

However, since we do not have information on direct materials used, we cannot calculate the total manufacturing costs.

Therefore, the cost of goods manufactured for the year is:

Cost of Goods Manufactured = Total Manufacturing Costs - Ending WIP Inventory

Again, since we do not have information on the ending WIP inventory, we cannot calculate the cost of goods manufactured using this formula.

The only information we have is the total manufacturing overhead applied, which is $153,000. This amount represents a portion of the total manufacturing costs, but we don't know how much. Since we don't have enough information to calculate the cost of goods manufactured with certainty, we must select the answer choice that is closest to the total manufacturing costs:

A) $252,000: This is less than the total manufacturing overhead applied, so it cannot be the correct answer.
B) $454,000: This is more than twice the total manufacturing overhead applied. It is unlikely that the total manufacturing costs would be this high based on the limited information provided.
C) $510,000: This is the closest answer to the total manufacturing costs, based on the assumption that the manufacturing overhead applied represents 60% of the total manufacturing costs. This assumption may not be accurate, but it is the best estimate we can make with the information given.
D) $460,000: This is less than twice the total manufacturing overhead applied, so it cannot be the correct answer. Cost of goods manufactured is represented by the debit to Finished Goods and the credit to Work in Process (entry f)= $510,000 cost of goods manufactured

The Following Accounts Are from Last Year's Books at Sharp