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Finding the Adjusted Cost of Goods Sold

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Tulsa Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just-completed year:

Estimated total manufacturing overhead at the beginning of the year $ 638,250
Estimated direct-labor hours at the beginning of the year 37,000 direct-labor hours

Results of operations:
Actual direct-labor hours 34,000 direct-labor hours
Manufacturing overhead:
Indirect labor cost $ 148,000
Other manufacturing overhead costs incurred 450,000
Cost of goods manufactured 1,611,000
Cost of goods sold (unadjusted) 1,518,000

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Solution Summary

This solution illustrates how to find the predetermined overhead rate, whether overhead is overapplied or underapplied, and how to compute the adjusted cost of goods sold.

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First, we must find the predetermined overhead rate per direct labor hour:

Predetermined overhead rate = $638,250/37,000
Predetermined overhead rate = $17.25 per direct labor hour

Now, we find the overhead applied:
Overhead applied = Predetermined overhead * Actual direct-labor ...

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