SparkCrafters is a custom jeweller that uses job costing to track production costs.

At the beginning of March, the following jobs were in progress:

Order 301 was 100% complete, in Finished Goods Inventory.
Order 302 was 50% complete, in Work in Process Inventory.

Production activity during March:

Orders 301 and 302 were completed and sold by the end of March, for a combined sales revenue of $75,000.
The company started and completed Order 303, but it was not sold by the end of March.

Inventory Balances:

Inventory Type Opening Balance Closing Balance
Work in Process $15,000 (Order 302) $0
Finished Goods $28,000 (Order 301) $19,000 (Order 303)

March costs:

Direct labour: $8,250 (170 hours at $55/hour)
Direct materials: $9,400
Manufacturing overhead is applied at 150% of direct labour cost.
Actual overhead incurred:
Indirect labour: $2,900
Indirect materials: $3,600
Other overhead: $3,150
Selling and administrative expenses: $4,500

Required:

Calculate the adjusted cost of goods sold for March. Show your final answer to the nearest dollar.

Question

SparkCrafters is a custom jeweller that uses job costing to track production costs.

At the beginning of March, the following jobs were in progress:

Order 301 was 100% complete, in Finished Goods Inventory.
Order 302 was 50% complete, in Work in Process Inventory.

Production activity during March:

Orders 301 and 302 were completed and sold by the end of March, for a combined sales revenue of $75,000.
The company started and completed Order 303, but it was not sold by the end of March.

Inventory Balances:

Inventory Type	Opening Balance	Closing Balance
Work in Process	$15,000 (Order 302)	$0
Finished Goods	$28,000 (Order 301)	$19,000 (Order 303)

March costs:

Direct labour: $8,250 (170 hours at $55/hour)
Direct materials: $9,400
Manufacturing overhead is applied at 150% of direct labour cost.
Actual overhead incurred:
Indirect labour: $2,900
Indirect materials: $3,600
Other overhead: $3,150
Selling and administrative expenses: $4,500

Required:

Calculate the adjusted cost of goods sold for March. Show your final answer to the nearest dollar.

BlackTom AI · Accepted Answer

We need to determine the adjusted cost of goods sold (COGS) for March using the information given.
First, identify which costs flow into COGS for the units sold in March. Orders 301 (100% complete at opening and sold in March) and 302 (50% complete at opening, completed and sold in March) are the ones contributing to COGS for March. Order 303 was started and completed in March but not sold, so its costs remain in Finished Goods at month-end and are not part of COGS for March.
Next, separate the costs into two groups: costs to complete 302 (including the opening WIP) and costs associated with 301.
- Opening balances: WIP for Order 302 is 15,000 (50% complete); FG contains 28,000 for Order 301 at opening. Ending FG includes 19,000 for Order 303, which will not be part of March COGS.
- March costs incurred: Direct labour = 8,250; Direct materials = 9,400; Manufacturing overhead is to be considered using actual overhead, not the applied rate, for the purpose of the “adjusted” COGS. The actual overhead incurred is the sum of Indirect labour 2,900, Indirect materials 3,600, Other overhead 3,150, totaling 9,650. Note that the applied overhead (150% of DL) would be 12,375, but the instruction calls for adjustment using actual overhead here.
Compute the costs to carry into COGS:
1) Costs to complete Order 302 during March (beyond its opening 50%) consist of the March costs incurred: DL 8,250 + DM 9,400 + actual overhead 9,650 = 27,300.
2) The opening WIP for Order 302 (15,000) represents the portion already incurred; it will be completed as part of March activities. When calculating COGS, we include the opening WIP cost plus the costs incurred in March to complete it: 15,000 + 27,300 = 42,300 as the total cost to complete Order 302.
3) Order 301 starts the month already 100% complete and in FG with a cost of 28,000; since it is sold in March, its cost flows to COGS directly: 28,000.
4) The total cost of goods manufactured that is transferred to COGS for March equals the sum for Order 301 and the completed Order 302: 28,000 + 42,300 = 70,300.
5) Ending Finished Goods includes 19,000 for Order 303, which is not sold in March and must be subtracted from COGS under a COGM-to-COGS calculation. The adjusted COGS is COGM minus Ending FG: 70,300 − 19,000 = 51,300.
Putting it all together, the adjusted cost of goods sold for March is 51,300 when using actual overhead costs to adjust the manufacturing overhead component.

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