ABC Company applies overhead to products using a pre-determined overhead rate of 80% of direct labor cost. During 2022, ABC Company began work on three jobs. Information relating to these three jobs appears below: Job A Job B Job C direct materials ....... $55,000 $75,000 $71,000 direct labor ........... $42,000 $39,000 $64,000 By the end of 2022, Job A and Job C had been completed. Job B was not completed by the end of 2022. Additionally, by the end of 2022, Job C had been sold while Job A was not sold. ABC Company had total actual overhead cost of $150,000 during 2022. Assume there were no inventories of any type at January 1, 2022. Calculate ABC Company's cost of goods sold for 2022 after the overhead variance is closed.
Total direct labor cost = $42,000 + $39,000 + $64,000 = $145,000
The Overhead applied = Total direct labor cost x Predetermined overhead rate
= $145,000 x 80% = $116,000
Actual overhead costs incurred = $150,000
Overhead Underapplied = $150,000 - $116,000 = $34,000
Total cost of Job-C = Direct material + Direct labor + Overhead applied
= $71000+64,000+(64000*80%) = $186200
Cost of goods sold for 2022 after the overhead variance = Total cost of Job-C + overhead Underapplied
= $186200 + $34,000
= $220,200
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