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 Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 218,000 $ 265,000 ? $ 154,000 $ 364,000 $ 351,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year End of Year $ 55,000 $ 30,000 ? $ 26,000 $ 31,000 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 $666,000; and the net operating income was $33,000. 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

1) Income statement

Sales		1058000
Cost of goods sold (666000-13000)		653000
Gross profit		405000
Selling and administrative expense
Selling expense	218000
Administrative expense	154000
Total Selling and administrative expense		372000
Net income		33000

2) Schedule of cost of goods sold

Beginning finished goods	31000
Cost of goods manufactured	714000
Cost of goods available for sale	745000
Ending finished goods	79000
Unadjusted cost of goods sold	666000
Less: Over applied overhead	-13000
Adjusted cost of goods sold	653000

3) Schedule of cost of goods manufactured

Direct material used
Beginning raw material	55000
Raw material purchase	265000
Raw material available for use	320000
less: Ending raw material	30000
Direct material used		290000
Direct labor		21000
Manufacturing overhead applied		364000
Total manufacturing cost		675000
Beginning work in process		65000
Total cost of work in process		740000
Less: Ending work in process		26000
Cost of goods manufactured		714000