Castagnola Inc. has provided the following data for the month of January. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.
Work In Process | Finished Goods | Cost of Goods Sold | Total | |||||||||
Direct materials | $ | 880 | $ | 5,500 | $ | 23,100 | $ | 29,480 | ||||
Direct labor | 4,100 | 17,600 | 73,920 | 95,620 | ||||||||
Manufacturing overhead applied | 2,460 | 7,380 | 31,160 | 41,000 | ||||||||
Total | $ | 7,440 | $ | 30,480 | $ | 128,180 | $ | 166,100 | ||||
Manufacturing overhead for the month was overapplied by $1,000.
The company allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
The finished goods inventory at the end of January after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to:
$30,660
$30,664
$30,300
$30,296
Finished goods inventory before allocation of any overapplied manufacturing overhead = $30,480
Over applied overhead to be deducted from the finished goods inventory = Over applied overhead x Overhead applied to finished goods/Total overhead applied
= 1,000 x 7,380/41,000
= $180
The finished goods inventory at the end of January after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to = Finished goods inventory before allocation of any overapplied manufacturing overhead - Over applied overhead to be deducted from the finished goods inventory
= 30,480 - 180
= $30,300
Third option is the correct option
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