Allison Corporation reports end-of-year data as follows for 2009:
$$\begin{array} { | l | r | }
\hline \text { Sales revenue } & \$ 570,000 \
\hline \text { Actual manufacturing overhead } & \$ 103,600 \
\hline \text { Allocated manufactured overhead } & \$ 96,000 \
\hline \text { Cost of goods sold } & \$ 368,000 \
\hline
\end{array}$$ Allison Corporation adjusts cost of goods sold for any balance in the manufacturing overhead account at the end of the year. What is the 2009 gross profit of Allison Corporation?

Question

Allison Corporation reports end-of-year data as follows for 2009:
$$\begin{array} { | l | r | } 
\hline \text { Sales revenue } & \$ 570,000 \
\hline \text { Actual manufacturing overhead } & \$ 103,600 \
\hline \text { Allocated manufactured overhead } & \$ 96,000 \
\hline \text { Cost of goods sold } & \$ 368,000 \
\hline
\end{array}$$ Allison Corporation adjusts cost of goods sold for any balance in the manufacturing overhead account at the end of the year. What is the 2009 gross profit of Allison Corporation?

Quizplus · Accepted Answer

The gross profit is calculated as Sales Revenue - Adjusted Cost of Goods Sold. The adjustment for Cost of Goods Sold involves the difference between Actual Manufacturing Overhead and Allocated Manufacturing Overhead. The Actual Manufacturing Overhead is $103,600, and the Allocated Manufacturing Overhead is $96,000, resulting in an underallocated overhead of $7,600. Therefore, the adjusted Cost of Goods Sold is $368,000 + $7,600 = $375,600. The gross profit is then $570,000 - $375,600 = $194,400.

Allison Corporation Reports End-Of-Year Data as Follows for 2009 Allison Corporation Adjusts Cost of Goods Sold for Any Balance