Question

The following data have been taken from the accounting records of Watson Corporation for the previous year.

	Sales........................................................................	$880
	Raw materials inventory, beginning.......................	$20
	Raw materials inventory, ending............................	$30
	Purchases of raw materials......................................	$150
	Direct labor.............................................................	$180
	Manufacturing overhead applied............................	$230
	Manufacturing overhead expenses.........................	$150
	Administrative expenses.........................................	$100
	Selling expenses......................................................	$130
	Work in process inventory, beginning....................	$80
	Work in process inventory, ending.........................	$30
	Finished goods inventory, beginning......................	$120
	Finished goods inventory, ending..........................	$100

Use these data to answer the following series of questions.

1. The cost of the raw materials used in production during the year (in thousands of dollars) was:

$170

$140

$160

$180

  

  2.    The cost of goods manufactured (finished) for the year (in thousands of dollars) was:

600

580

630

620

  3.    The cost of goods sold for the year (in thousands of dollars) was:

620

700

580

720

4. The difference between actual and applied overhead is__________ which _________ cost of goods sold:

$80 overapplied; understates

$80 overapplied; overstates

$80 underapplied; understates

$80 underapplied; overstates

Answer 1

1)	Raw materials used in production
	Raw materials inventory,beginning					20
	purchases of raw materials					150
	total cost of goods available					170
	Raw materials inventory,ending					-30
	Raw materials used in production					140	answer
2)	cost of goods manufactured
	Direct materials used					140
	Direct labor					180
	Manufacturing overhead applied					230
	total manufacturing cost					550
	Add work in process ,beginning					80
	less work in process,ending					-30
	cost of goods manufactured					600
3)	Cost of goods sold
	finished goods inventory,beginning					120
	cost of goods manufactured					600
	finished goods inventory, ending					-100
	Cost of goods sold					620
4)	$80 overapplied ; overstates