Richie Manufacturing had underapplied overhead of $42,000 in 20X0. Before adjusting for overapplied or underapplied overhead, the ending inventories for direct materials, WIP, and finished goods were $71,000, $161,000, and $138,000, respectively. Unadjusted cost of goods sold was $276,000. 1. Assume that the $42,000 was written off solely as an adjustment to cost of goods sold. Compute the adjusted cost of goods sold. 2. Management has decided to prorate the $42,000 to the appropriate accounts (using the unadjusted ending balances) instead of writing it off solely as an adjustment of cost of good sold. Would gross profit be highter or lower than in requirement 1? By how much?
Richie Manufacturing had underapplied overhead of $42,000 in 20X0. Before adjusting for overapplied or underapplied overhead, the ending inventories for direct materials, WIP, and finished goods were $71,000, $161,000, and $138,000, respectively. Unadjusted cost of goods sold was $276,000. 1. Assume that the $42,000 was written off solely as an adjustment to cost of goods sold. Compute the adjusted cost of goods sold. 2. Management has decided to prorate the $42,000 to the appropriate accounts (using the unadjusted ending balances) instead of writing it off solely as an adjustment of cost of good sold. Would gross profit be highter or lower than in requirement 1? By how much?
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter1: Introduction To Cost Accounting
Section: Chapter Questions
Problem 8P: OReilly Manufacturing Co.s cost of goods sold for the month ended July 31 was 345,000. The ending...
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Richie Manufacturing had underapplied
1. Assume that the $42,000 was written off solely as an adjustment to cost of goods sold. Compute the adjusted cost of goods sold.
2. Management has decided to prorate the $42,000 to the appropriate accounts (using the unadjusted ending balances) instead of writing it off solely as an adjustment of cost of good sold. Would gross profit be highter or lower than in requirement 1? By how much?
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