The Tse Manufacturing Corporation uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. The company closes any balance in the Manufacturing Overhead account to Cost of Goods Sold. During the year the company's Finished Goods inventory account was debited for $125,000 and credited for $110,000. The ending balance in the Finished Goods inventory account was $28,000. At the end of the year, manufacturing overhead was overapplied by $4,500.If the estimated manufacturing overhead for the year was $24,000, and the applied overhead was $26,500, the actual manufacturing overhead cost for the year was:
A) $19,500
B) $22,000
C) $28,500
D) $31,000

Question

Quizplus · Accepted Answer

The cost of goods sold can be calculated using the formula:

Cost of Goods Sold = Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory

Using the information given in the question, we can calculate the Cost of Goods Sold:

Cost of Goods Sold = $110,000 + Cost of Goods Manufactured - $28,000
$Cost of Goods Sold = $82,000 + Cost of Goods Manufactured

We know that the overhead applied during the year was $26,500, and that the estimated overhead for the year was $24,000. This means that the overhead was overapplied by $2,500 (applied overhead - estimated overhead = overapplied overhead). Therefore, we need to subtract this amount from the total manufacturing cost to find the actual overhead cost:

Actual Manufacturing Overhead = Applied Overhead - Overapplied Overhead
Actual Manufacturing Overhead = $26,500 - $2,500
Actual Manufacturing Overhead = $24,000

Using this information, we can calculate the Cost of Goods Manufactured:

Cost of Goods Manufactured = Direct Materials Used + Direct Labor + Manufacturing Overhead Applied
Cost of Goods Manufactured = $75,000 + $42,000 + $26,500
Cost of Goods Manufactured = $143,500

Now we can substitute the Cost of Goods Manufactured into the Cost of Goods Sold equation to find the answer:

Cost of Goods Sold = $82,000 + $143,500 - $28,000
Cost of Goods Sold = $197,500

Therefore, the actual manufacturing overhead cost for the year was:

Actual Manufacturing Overhead = $24,000.

The Tse Manufacturing Corporation Uses a Job-Order Costing System and Applies