Question

The following data from the just completed year are taken from the accounting records of Mason Company:

Sales $ 659,000

Direct labor cost $ 83,000

Raw material purchases $ 130,000

Selling expenses $ 107,000

Administrative expenses $ 48,000

Manufacturing overhead applied to work in process $ 209,000

Actual manufacturing overhead costs $ 225,000

Inventories

Beginning Ending

Raw materials: $8,300 $10,700

Work in process: $5,800 $20,300

Finished goods: $78,000 $25,100

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

1.

Schedule of cost of goods manufactured
Opening bal of raw materials	8300
Purchase of raw materials	130000
Raw materials available for use	138300
Less: Closing bal of raw materials	10700
Direct materials used in production		127600
Direct Labor		83000
Manufacturing overhead applied to work in process		209000
Total Manufacturing costs		419600
Add: Beginning WIP Inventory		5800
		425400
Less: Ending WIP Inventory		20300
Cost of goods manufactured		405100

2.

Schedule of cost of goods sold
Cost of goods manufactured		405100
Add: Beginning Finished goods inventory		78000
Cost of goods available for sale		483100
Less: Ending finished goods inventory		25100
		458000
Add: Underapplied overhead		16000
Cost of goods sold		474000

3.

Income Statement
Sales		659000
Less: Cost of goods sold		474000
Gross Profit		185000
Less: Selling and admin expenses
Selling expenses	107000
Administrative expenses	48000
Total selling and admin expenses		155000
Net operating income		30000