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The balance in White Company's Work in Process inventory account was $15,000 on August 1 and $18,000 on August 31
The balance in White Company's Work in Process inventory account was $15,000 on August 1 and $18,000 on August 31. The company incurred $30,000 in direct labor cost during August and requisitioned $25,000 in raw materials (all direct material). If the sum of the debits to the Manufacturing Overhead account total $28,000 for the month, and if the sum of the credits totaled $30,000. Which of the following statements about finished goods inventory and manufacturing overhead is correct?
A. Finished Goods was debited for $82,000 during the month.
B. Finished Goods was credited for $83,000 during the month.
C. Manufacturing Overhead was underapplied by $2,000 at the end of the month.
D. Finished Goods was debited for $85,000 during the month.
Expert Solution
Answer: A. Finished Goods was debited for $82,000 during the month.
Explanation:
Schedule of Cost of Goods Manufactured:
| Amount | |
|---|---|
| Direct Materials | $25,000 |
| Direct Labor | 30,000 |
| Manufacturing Overhead Applied | 30,000 |
| Total Manufacturing Cost | $85,000 |
| Add: work-in-Process Beginning | 15,000 |
| Less: Work-in-Process Ending | 18,000 |
| Cost of Goods Manufactured | $82,000 |
Cost of Goods Manufactured relates to the cost of goods that have completed the manufacturing process and will be transferred from Work in Process inventory to Finished Goods inventory. This amount will be debited to Finished Goods inventory to reflect an increase in finished goods.
Overhead Variance = Applied Overhead - Actual Overhead
Overhead Variance = $30,000 - $28,000
Overhead Variance = $2,000 over-applied
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