Math Problem Statement

Jurvin Enterprises is a manufacturing company with no beginning inventories. A subset of the transactions it recorded during a recent month is shown below.

Purchased $76,700 in raw materials for cash. $71,000 in raw materials were used in production. Of this amount, $66,200 was direct materials and the remainder was indirect materials. Paid employees $152,000 cash. Of this amount, $133,900 was direct labor and the remainder was indirect labor. Paid $125,200 for additional manufacturing overhead costs. Applied manufacturing overhead of $127,100 to production using the company’s predetermined overhead rate. All of the jobs in process at the end of the month were completed. All of the completed jobs were shipped to customers. Any underapplied or overapplied overhead was closed to Cost of Goods Sold. Required:

Calculate the adjusted cost of goods sold for the period.

Solution

To calculate the Adjusted Cost of Goods Sold for Jurvin Enterprises, we need to follow these steps:

Step 1: Calculate the Total Manufacturing Costs incurred during the month

Manufacturing costs consist of Direct Materials, Direct Labor, and Applied Manufacturing Overhead.

  • Direct Materials used: $66,200
  • Direct Labor: $133,900
  • Applied Manufacturing Overhead: $127,100

Total Manufacturing Costs=66,200+133,900+127,100=327,200\text{Total Manufacturing Costs} = 66,200 + 133,900 + 127,100 = 327,200

Step 2: Determine the Cost of Goods Manufactured (COGM)

Since all jobs in process at the end of the month were completed, the total manufacturing costs represent the cost of goods manufactured.

COGM=327,200\text{COGM} = 327,200

Step 3: Account for Cost of Goods Sold (COGS)

All completed jobs were shipped to customers, so the COGM is also the Unadjusted Cost of Goods Sold (COGS):

Unadjusted COGS=327,200\text{Unadjusted COGS} = 327,200

Step 4: Adjust for Underapplied or Overapplied Overhead

The company applied $127,100 in manufacturing overhead but also incurred $125,200 in actual manufacturing overhead. To adjust for overapplied or underapplied overhead:

  • Applied Overhead: $127,100
  • Actual Overhead: $125,200

Overapplied Overhead=127,100−125,200=1,900\text{Overapplied Overhead} = 127,100 - 125,200 = 1,900

Since the overhead was overapplied, we reduce the unadjusted COGS by the overapplied amount.

Step 5: Calculate Adjusted COGS

Adjusted COGS=327,200−1,900=325,300\text{Adjusted COGS} = 327,200 - 1,900 = 325,300

Final Answer:

The Adjusted Cost of Goods Sold for the period is $325,300.

Would you like further details on any step or clarification?

Related Questions:

  1. How is predetermined overhead rate calculated in manufacturing companies?
  2. What are the key differences between direct and indirect labor/materials?
  3. How does underapplied overhead affect financial statements?
  4. What is the process for calculating Cost of Goods Manufactured (COGM)?
  5. How is Cost of Goods Sold (COGS) adjusted in different manufacturing setups?

Tip:

Always track actual and applied overhead closely to avoid discrepancies in financial reporting. Overapplied or underapplied overhead can distort profit figures.

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Math Problem Analysis

Mathematical Concepts

Cost Accounting
Manufacturing Overhead
Applied Overhead
Cost of Goods Sold

Formulas

Total Manufacturing Costs = Direct Materials + Direct Labor + Applied Overhead
Overapplied/Underapplied Overhead = Applied Overhead - Actual Overhead
Adjusted COGS = Unadjusted COGS - Overapplied Overhead

Theorems

Cost of Goods Manufactured (COGM)
Cost of Goods Sold (COGS)

Suitable Grade Level

College-level Accounting

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