Crombie 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 has provided the following data for June: 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

Crombie 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 has provided the following data for June:   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:

Quizplus · Accepted Answer

To calculate the adjusted cost of goods sold, we need to first calculate the total manufacturing costs incurred during the June:
Direct materials: $224,000
Direct labor: $72,000
Factory overhead applied: $104,000
Total manufacturing costs: $400,000

To calculate the cost of goods sold, we need to subtract the ending finished goods inventory from the total manufacturing costs. 
Ending finished goods inventory: $34,000

$400,000 - $34,000 = $366,000

However, we need to adjust for any underapplied or overapplied overhead. The actual overhead incurred was $102,000 while the overhead applied was $104,000, which means that overhead was overapplied by $2,000. This amount needs to be credited to cost of goods sold to adjust for the overapplied overhead.

$366,000 - $2,000 = $164,000

Since we are asked for the closest option, the answer is A) $166,000.