In the Vasquez Corporation, any overapplied or underapplied manufacturing overhead is closed out to Cost of Goods Sold. Last year, the Corporation incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of manufacturing overhead cost to jobs. The beginning and ending balances of Finished Goods were equal, and the Corporation’s Cost of Goods Manufactured for the year totaled $71,000. Given this information, Cost of Goods Sold, after adjustment for any overapplied or underapplied manufacturing overhead, for the year must have been: Haack Incorporated is a merchandising company. Last month the company’s cost of goods sold was $70,600. The company’s beginning merchandise inventory was $11,500 and its ending merchandise inventory was $30,000. What was the total amount of the company’s merchandise purchases for the month?<\/p>\n\n\n\n
The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n Sure! Let\u2019s break down each problem carefully with explanations and then provide the answers.<\/p>\n\n\n\n Given:<\/strong><\/p>\n\n\n\n Step 1: Find Overapplied or Underapplied Overhead<\/strong> Step 2: Calculate Unadjusted COGS<\/strong> $$ Step 3: Adjust COGS for Overapplied Overhead<\/strong> $$ $$ Adjusted Cost of Goods Sold = \\$69,000<\/strong><\/p>\n\n\n\n Given:<\/strong><\/p>\n\n\n\n Step 1: Use the Inventory and COGS Relationship<\/strong> $$ Rearranged to solve for Purchases:<\/p>\n\n\n\n $$ Step 2: Plug in the values<\/strong><\/p>\n\n\n\n $$ Merchandise Purchases = \\$89,100<\/strong><\/p>\n\n\n\n Manufacturing overhead costs are often applied to products based on a predetermined rate, which can cause a difference between the overhead applied to production and the actual overhead costs incurred. This difference is known as overapplied or underapplied overhead. If the applied overhead exceeds the actual overhead, the difference is overapplied and means that the company allocated more cost to production than actually incurred.<\/p>\n\n\n\n In this problem, Vasquez Corporation applied \\$29,000 but actually incurred \\$27,000, resulting in \\$2,000 overapplied overhead. Because beginning and ending finished goods inventories were equal, the cost of goods manufactured equals the unadjusted cost of goods sold before overhead adjustments.<\/p>\n\n\n\n Since overapplied overhead represents a cost reduction (because too much cost was applied), it reduces the cost of goods sold by \\$2,000. Hence, the adjusted COGS becomes \\$69,000. This adjustment ensures the financial statements accurately reflect the actual manufacturing costs incurred during the year.<\/p>\n\n\n\n For merchandising companies like Haack Incorporated, the cost flow of inventory is crucial to understanding how much was purchased during a period. The formula linking beginning inventory, purchases, ending inventory, and cost of goods sold shows the flow of goods through inventory.<\/p>\n\n\n\n The company\u2019s cost of goods sold (\\$70,600) is the cost of inventory that was sold during the month. The beginning inventory was \\$11,500, and at the end of the month, inventory increased to \\$30,000, meaning the company bought more inventory than it sold. Using the inventory formula, purchases are calculated by adding the ending inventory and COGS, then subtracting beginning inventory. This yields purchases of \\$89,100, which represents the total cost of merchandise acquired during the month.<\/p>\n\n\n\n If you want, I can also provide step-by-step explanations for these types of problems or create practice questions!<\/p>\n","protected":false},"excerpt":{"rendered":" In the Vasquez Corporation, any overapplied or underapplied manufacturing overhead is closed out to Cost of Goods Sold. Last year, the Corporation incurred $27,000 in actual manufacturing overhead cost, and applied $29,000 of manufacturing overhead cost to jobs. 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\n\n\n\nProblem 1: Vasquez Corporation \u2014 Adjusted Cost of Goods Sold (COGS)<\/strong><\/h3>\n\n\n\n
\n
Applied MOH (\\$29,000) \u2013 Actual MOH (\\$27,000) = \\$2,000 overapplied overhead
This means the company applied \\$2,000 more overhead than it actually incurred.<\/p>\n\n\n\n
Since beginning and ending Finished Goods balances are equal, there is no change in Finished Goods Inventory, so:<\/p>\n\n\n\n
\\text{COGS unadjusted} = \\text{COGM} = 71,000
$$<\/p>\n\n\n\n
Because overhead is overapplied, COGS must be decreased by the overapplied amount to reflect actual costs:<\/p>\n\n\n\n
\\text{COGS adjusted} = \\text{COGS unadjusted} – \\text{Overapplied overhead}
$$<\/p>\n\n\n\n
= 71,000 – 2,000 = 69,000
$$<\/p>\n\n\n\n
\n\n\n\nAnswer for Problem 1:<\/strong><\/h3>\n\n\n\n
\n\n\n\nProblem 2: Haack Incorporated \u2014 Merchandise Purchases<\/strong><\/h3>\n\n\n\n
\n
The basic inventory formula is:<\/p>\n\n\n\n
\\text{COGS} = \\text{Beginning Inventory} + \\text{Purchases} – \\text{Ending Inventory}
$$<\/p>\n\n\n\n
\\text{Purchases} = \\text{COGS} + \\text{Ending Inventory} – \\text{Beginning Inventory}
$$<\/p>\n\n\n\n
\\text{Purchases} = 70,600 + 30,000 – 11,500 = 70,600 + 18,500 = 89,100
$$<\/p>\n\n\n\n
\n\n\n\nAnswer for Problem 2:<\/strong><\/h3>\n\n\n\n
\n\n\n\nExplanation in Detail<\/strong><\/h3>\n\n\n\n
Vasquez Corporation<\/h4>\n\n\n\n
\n\n\n\nHaack Incorporated<\/h4>\n\n\n\n
\n\n\n\n