Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): Selling expenses $ 213,000 Purchases of raw materials $ 263,000 Direct labor ? Administrative expenses $ 151,000 Manufacturing overhead applied to work in process $ 372,000 Actual manufacturing overhead cost $ 356,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 54,000 $ 37,000 Work in process ? $ 24,000 Finished goods $ 30,000 ? The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $664,000; and the net operating income was $39,000. The company’s underapplied or overapplied overhead is closed to Cost of Goods Sold. Required: Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. (Hint: Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of goods manufactured.)

Answer 1

Income Statement: Particulars Sales (cost of goods sold + Gross profit) |(-) Cost of goods sold Gross profit (39000+213000+151000) |(-) Selling expenses |(-) Administration expenses Net operating income 1083000 -680000 403000 -213000 -151000 39000 30000 715000 Cost of Goods Sold: Particulars Beginning Finished goods inventory |(+) Cost of Goods Manufactured |(745000-30000) Total goods available for sale |(-) Ending Finished goods inventory |(745000-664000) Cost of goods sold (-) Manufacturing overhead under applied (372000-356000) |Adjusted cost of goods sold 745000 -81000 664000 -16000 680000

Cost of Goods Manufactured: Particulars (+) Beginning raw materials inventory cost of material purchased Total raw material available |(-) Ending raw materials inventory Total raw materials used Direct labor (675000-356000-280000) Manufacturing overhead Total manufacturing cost |(+) Beginning Work-in-process inventory |(715000-673000+24000) (-) Ending work-in-process inventory Cost of Goods Manufactured |(740000-31000) $ 54000 263000 317000 -37000 280000 39000 354000 673000 66000 -24000 715000