Question

PROBLEM 3–13 Schedules of Cost of Goods Manufactured and Cost of Goods Sold;
Income Statement LO3–3
Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials):

Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$140,000
Purchases of raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$290,000
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	?
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$100,000
Manufacturing overhead applied to work in process . . . . . . . . . . . . . . . . . . . . . . .	$285,000
Actual manufacturing overhead cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$270,00

Inventory balances at the beginning and end of the year were as follows:

	Beginning	Ending
Raw materials. . . . . . . . . . . . . . .	$40,000	$10,000
Work in process. . . . . . . . . . . . .	?	$35,000
Finished goods . . . . . . . . . . . . .	$50,000	?

The total manufacturing costs for the year were $683,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $660,000; and the net operating income was $30,000. 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 sched- ule of cost of goods manufactured.)

Answer 1

	Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	40000
Add: Purchases of raw materials	290000
Total raw materials available	330000
Deduct: Raw materials inventory, ending	10000
Raw materials used in production		320000
Direct labor		78000
Manufacturing overhead applied to work in process inventory		285000
Total manufacturing costs		683000
Add: Beginning work in process inventory		42000
		725000
Deduct: Ending work in process inventory		35000
Cost of goods manufactured		690000
	Schedule of Cost of Goods Sold
Finished goods inventory, beginning		50000
Add: Cost of goods manufactured		690000
Cost of goods available for sale		740000
Deduct: Finished goods inventory, ending		80000
Unadjusted cost of goods sold		660000
Less: Overapplied overhead		15000	=285000-270000
Adjusted cost of goods sold		645000
	Income Statement
Sales		915000
Cost of goods sold		645000
Gross margin .		270000
Selling and administrative expenses:
Selling expenses	140000
Administrative expense	100000	240000
Net operating income		30000