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Wabash Products uses a job costing system and applies overhead based on direct labor cost. Last year, manufacturing overhead was expected to be $2,400,000 and
Wabash Products uses a job costing system and applies overhead based on direct labor cost. Last year, manufacturing overhead was expected to be $2,400,000 and direct labor cost was estimated to be $1,000,000 (40,000 direct-labor hours). Actual manufacturing overhead amounted to $2,472,000 and direct labor cost was $1,100,000 (42,500 direct-labor hours). Wabash allocates an over- or underapplied overhead to the three accounts-Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold-based on those account balances. At the end of the year, the total amount in the three accounts (Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold) was $5.6 million before any allocation. As a part of the process, you learn that Wabash allocated $142,800 to Cost of Goods Sold. Required: What will Wabash report as Cost of Goods Sold for the year? Cost of Goods Sold
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