Watwood Inc. uses a job-order costing system in which any underapplied or overapplied overhead is closed out to cost of goods sold at the end of the month. The company's cost of goods manufactured for June was $230,000; its beginning finished goods inventory was $34,000; its ending finished goods inventory was $52,000; its manufacturing overhead was underapplied by $1,000. The cost of goods sold that appears on the income statement for June and that has been adjusted for any underapplied or overapplied overhead is closest to:

Question

Quizplus · Accepted Answer

The adjusted cost of goods sold can be calculated as follows:

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

Adjusted Cost of Goods Sold = $230,000 + $34,000 - $52,000

Adjusted Cost of Goods Sold = $212,000

Since manufacturing overhead was underapplied by $1,000, this amount is added to the adjusted cost of goods sold:

Adjusted Cost of Goods Sold + Underapplied Overhead = $212,000 + $1,000

Adjusted Cost of Goods Sold + Underapplied Overhead = $213,000

Therefore, the closest option is choice C, $213,000.