Jantore Industries Inc.reported the following information about the production and sale of its only product during the first month of operations:
$\begin{array}{ll}
\text { Selling price per unit } & \$ 65,00 \
\text { Sales } & \$ 78,000 \
\text { Direct materials used } & \$ 25,000 \
\text { Direct labor } & \$ 42,000 \
\text { Variable factory overhead } & \$ 17,000 \
\text { Fixed factory overhead } & \$ 15,000 \
\text { Variable selling and administrative expenses } & \$ 3,000 \
\text { Fixed selling and administrative expenses } & \$ 5,000 \
\text { Production volume variance } & 0
\end{array}$
The company sold one-half of the units it produced.Under absorption costing,what is the cost of goods sold?
A) $30,000
B) $42,000
C) $49,500
D) $78,000

Question

Quizplus · Accepted Answer

Under absorption costing, the cost of goods sold includes direct materials, direct labor, variable factory overhead, and fixed factory overhead. Since the company sold half of its production, we calculate the cost of goods sold as follows: Direct materials ($25,000) + Direct labor ($42,000) + Variable factory overhead ($17,000) + Fixed factory overhead ($15,000) = $99,000 for the total production. Since only half was sold, the cost of goods sold is $99,000 / 2 = $49,500.

Jantore Industries Inc The Company Sold One-Half of the Units It Produced