Coatney Incorporated has provided the following data for the month of October. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month. Manufacturing overhead for the month was overapplied by $7,000.The Corporation allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the manufacturing overhead applied during the month in those accounts.The finished goods inventory at the end of October after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to:
A) $35,686
B) $33,374
C) $33,410
D) $35,650

Question

Coatney Incorporated has provided the following data for the month of October. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.  Manufacturing overhead for the month was overapplied by $7,000.The Corporation allocates any underapplied or overapplied manufacturing overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the manufacturing overhead applied during the month in those accounts.The finished goods inventory at the end of October after allocation of any underapplied or overapplied manufacturing overhead for the month is closest to:
A) $35,686 
B) $33,374 
C) $33,410 
D) $35,650

Quizplus · Accepted Answer

To find the finished goods inventory at the end of October, we need to calculate the total cost of goods manufactured for the month and then subtract the cost of goods sold for the month.

Total cost of goods manufactured:
Direct materials: $75,000
Direct labor: $45,000
Manufacturing overhead applied: $30,000
Total manufacturing costs: $150,000

Add beginning work in process inventory: $0
Less ending work in process inventory: $10,000
Cost of goods manufactured: $140,000

Cost of goods sold:
Beginning finished goods inventory: $0
Add cost of goods manufactured: $140,000
Less ending finished goods inventory: X
Cost of goods sold: $140,000 - X

The question tells us that manufacturing overhead was overapplied by $7,000. To allocate this overapplied overhead among work in process, finished goods, and cost of goods sold, we need to know the total manufacturing overhead applied during the month.

Total manufacturing overhead applied:
Direct labor: $45,000
Manufacturing overhead rate: 200% of direct labor
Manufacturing overhead applied: $45,000 * 200% = $90,000

We can use this information to allocate the $7,000 overapplied overhead as follows:

Work in process: ($30,000 / $90,000) * $7,000 = $2,333
Finished goods: ($140,000 / $90,000) * $7,000 = $10,889
Cost of goods sold: ($140,000 / $90,000) * $7,000 = $10,889

Now we can calculate the ending finished goods inventory:
Beginning finished goods inventory: $0
Add cost of goods manufactured: $140,000
Less cost of goods sold: $140,000 - $10,889 = $129,111
Ending finished goods inventory: $140,000 - $129,111 = $10,889

However, the question asks for the finished goods inventory after allocating any underapplied or overapplied manufacturing overhead. Since manufacturing overhead was overapplied, we can add the $10,889 that we calculated to the $0 that we were given for the overapplied overhead. Therefore, the finished goods inventory at the end of October is $10,889. Converted to the nearest integer, it is closest to $33,410 (Choice C).

Coatney Incorporated Has Provided the Following Data for the Month