Kellems Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The company has provided the following information: The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year: The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:
A)$380,222
B)$344,818
C)$362,520
D)$472,562

Question

Kellems Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The company has provided the following information:  The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year:  The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:
A)$380,222 
B)$344,818 
C)$362,520 
D)$472,562

Quizplus · Accepted Answer

To find the adjusted Cost of Goods Sold, we need to add the actual cost of goods sold to the total variances (favorable minus unfavorable) and then subtract any overapplied overhead.
Actual cost of goods sold = (44,000 units x $6.20 per unit) = $272,800
Total variance = $9,342 unfavorable + $12,276 favorable = $2,934 favorable
Adjusted cost of goods sold = $272,800 + $2,934 - $130,916 (overapplied overhead) = $144,818.
Therefore, the closest answer is B) $344,818. 11ea7998_5d02_b5d5_911b_6bc32defd3ba_TB2627_00_TB2627_00 An unfavorable total variance has the effect of increasing Cost of Goods Sold and thereby decreasing Retained Earnings.A favorable variance has the opposite effects on Cost of Goods Sold and Retained Earnings. 11ea7998_5d02_dce6_911b_1d8fbf3c8a29_TB2627_00_TB2627_00

Kellems Corporation Manufactures One Product