Question

A manufacturing company has the following balances at the end of its first year’s operations: Sales OMR350,000; actual manufacturing overhead OMR150,000; manufacturing overhead applied OMR114,000; unadjusted costs of goods sold OMR175,000. The costs of goods sold balance includes overhead applied of OMR51,300. Ending Work in process inventory includes overhead applied of OMR34,700. Ending finished goods inventory includes overhead applied of OMR28,000. These balances are not adjusted for the overapplied or underapplied factory overhead. The company closes year-end manufacturing overhead balances proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. How much is the gross profit for the year after disposing the year-end overhead balances? Select one:

a. None of the answers given

b. OMR154,300

c. OMR139,000

d. OMR191,200

Answer 1

Actual manufacturing overhead	150000
Less: Manufacturing overhead applied	114000
Underapplied overhead	36000
Total overhead applied	114000	=51300+34700+28000
Underapplied overhead allocated to Cost of goods sold	16200	=36000*51300/114000
Unadjusted costs of goods sold	175000
Add: Underapplied overhead	16200
Adjusted costs of goods sold	191200
Sales	350000
Less: Adjusted costs of goods sold	191200
Gross profit	158800
The gross profit for the year is OMR158,800

Note: 158,800 is not one of the options listed, so none of the answers given