Question

Morrow Corporation had only one job in process during May—Job X32Z—and had no finished goods inventory on May 1. Job X32Z was started in April and finished during May. Data concerning that job appear below:        

	Job X32Z
Beginning balance	$	5,000
Charged to the job during May
Direct materials	$	8,000
Direct labor	$	2,000
Manufacturing overhead applied	$	4,000
Units completed		100
Units in process at the end of May		0
Units sold during May		40

In May, overhead was overapplied by $300. The company adjusts its cost of goods sold every month for the amount of the overhead that was underapplied or overapplied.

Required:

1. Using the direct method, what is the cost of goods sold for May?

2. What is the total value of the finished goods inventory at the end of May?

3. What is the total value of the work in process inventory at the end of May?

Answer 1

1	Computation of cost of goods sold for the month of May:
	Schedule of Cost of Goods Sold - Direct method
	Beginning balance	$5,000
Add:	Direct materials	$8,000
Add:	Direct labor	$2,000
Add:	Manufacturing overhead Applied	$4,000
(a)	Total	$19,000
(b)	Units completed	100
(c)	Unit product cost [(a) / (b)]	$190
(d)	Units sold	40
	Unadjusted Cost of goods sold [(c) X (d)]	$7,600
Less:	Overapplied overheads	$300
	Cost of goods sold	$7,300
2	Computation of total value of Finished goods inventory at the end of May:
	Finished goods inventory	=	(Units Completed - Units sold) X Unit product cost
		=	(100 - 40) X 190
		=	$     11,400
3	Computation of total value of Work in process inventory at the end of May:
	Total value of Work in process inventory	=	0