Heathcote Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Results of operations:
The adjusted Cost of Goods Sold for the year is:
A) $1,603,000
B) $1,458,000
C) $1,453,000
D) $1,463,000

Question

Heathcote Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year:  Results of operations:
 The adjusted Cost of Goods Sold for the year is:
A) $1,603,000 
B) $1,458,000 
C) $1,453,000 
D) $1,463,000

Quizplus · Accepted Answer

As the company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year, the Adjusted Cost of Goods Sold can be calculated as follows: 
Total Manufacturing Cost = Direct Material + Direct Labor + Manufacturing Overhead
= $710,000 + $465,000 + $364,000
= $1,539,000
Add: Underapplied Overhead
= $67,500
Adjusted Cost of Goods Sold = Total Manufacturing Cost + Underapplied Overhead - Ending Finished Goods Inventory
= $1,539,000 + $67,500 - $153,500
= $1,453,000
Therefore, the best choice is C.

Heathcote Corporation Is a Manufacturer That Uses Job-Order Costing