Grayson Inc. has provided the following data for the month of October. The balance in the Finished Goods inventory account at the beginning of the month was $56,000 and at the end of the month was $52,000. The cost of goods manufactured for the month was $233,000. The actual manufacturing overhead cost incurred was $81,000 and the manufacturing overhead cost applied to Work-in-Process was $77,000. The adjusted cost of goods sold that would appear on the income statement for October is:

The adjusted cost of goods sold that would appear on the income statement for October is $241,000

Explanation:

It is important to note that Grayson Inc. is in the Manufacturing Business and thus the cost of goods sold figure must consist of cost of manufactured goods.

With every manufacturing business, there is an issue that arises on amount of Overapplied and Underapplied overheads and these must be adjasted in the cost of sales figure.

Calculation of Cost of Sales Figure

Openning Stock of Finished Goods                            56,000

Add Cost of Goods Manufactured For the Month    233,000

Less Clossing Stock of Finished Goods                     52,000

Add Underapplied Manufacturing Overhead Cost     4,000

Cost of Sales                                                                241,000

Actual Overheads $81,000 > Applied Overheads$77,000 thus the Manufacturing overheads were Underapplied

Underapplied overheads are added to cost of goods sold

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