Question

The following data from the just completed year are taken from the accounting records of Mason Company: Sales Direct labor cost Raw material purchases Selling expenses Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead costs $ 657,000 $ 90,000 $ 131,000 $ 103,000 $ 43,000 $ 200,000 $ 224,000 Inventories Raw materials Work in process Finished goods Beginning $ 8,100 $ 5,600 $ 74,000 Ending $ 10,400 $ 20,500 $ 25,000 Required: 1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials. 2. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold. 3. Prepare an income statement.

Answer 1

MASON COMPANY Schedule of Cost of goods Manufactured Direct Material Raw Material inventory Beginning $ 8,100 Add: Raw materials purchases $ 131,000 Total Raw materials available $ 139.100 Less: Raw materials inventory Ending $ 10,400 Raw Materials used in production Direct Labour Manufacturing overhead applied Total Manufacturing Costs Add: Work in process inventory Beginning Less: work in process inventory Ending Cost of goods Manufactured $ S $ S $ S $ 128,700 90.000 200.000 418.700 5,600 (20,500) 403.800

MASON COMPANY Schedule of Cost of goods Sold Finished goods inventory, beginning $ 74,000 Add: Cost of Goods manufactured $ 403,800 Cost of goods available for sale $ 477,800 Less: Finished goods inventory, ending S (25,000 Unadjusted cost of goods sold S 452.800 Add: Under applied overhead $ 24,000 Adjusted Cost of goods sold $ 476.800 Note : Under Applied Overhead =Actual manufacturing overhaed cost - Manufacturing overhead applied to work in process = $224,000-$200,000 = $24000

3.) MASON COMPANY Income Statement Sales Less: Cost of Goods Sold Gross Margin Less: Selling and administrative Expenses Selling Expenses S Administrative Expenses S Net Operative Income S $ $ 657,000 476.800 180,200 103,000 43,000 $ $ 146,000 34,200