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 s 654,000 $ 81,000 135,000 101,000 $ 42,000 s 200,000 $ 227,000 Inventories Raw materials Work in process Finished goods Beginning Ending $ 8,100 10,400 $ 5,100 20,800 $ 76,000 25,700 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 Materials
	Raw Material Inventory beginning	$       8,100
Add:	Purchases of raw Material	$ 1,35,000
	Total Raw Material available	$ 1,43,100
Less:	Raw Material Inventory ending	$     10,400
	Raw Material used in production		$   1,32,700
	Direct Labor		$       81,000
	Manufacturing overhead		$   2,00,000
	Total manufacturing cost		$   4,13,700
Add:	Beginning work in process inventory		$         5,100
			$   4,18,800
Less:	Ending work in process inventory		$       20,800
	Cost of goods manufactured		$   3,98,000
	Mason Company
	Schedule of Cost of Goods Sold
	Finished Goods Inventory Beginning	$     76,000
Add:	Cost of goods manufactured	$ 3,98,000
	Cost of goods available for sale	$ 4,74,000
Less:	Finished Goods Inventory Ending	$     25,700
	Unadjusted cost of goods sold	$ 4,48,300
Add:	Under applied Overheads	$     27,000
	Adjusted cost of goods sold	$ 4,75,300
	Workings:
2	Under applied Overheads = Actual Manufacturing overheads - Manufacturing overheads applied
	Under applied Overheads = $2,27,000 - $2,00,000 = $27,000
	Mason Company
	Income Statement
	Sales		$   6,54,000
Less:	Cost of Goods Sold		$   4,75,300
	Gross Margin		$   1,78,700
Less:	Selling and Administrative Expenses:
	Selling Expense	$ 1,01,000
	Administrative Expense	$     42,000	$   1,43,000
	Net Operating Income		$       35,700