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 $ 87,000 $ 138,000 $ 101,000 $ 45,000 $ 201,000 $ 223,000 Inventories Raw materials Work in process Finished goods Beginning $ 9,000 $ 5,800 $ 78,000 Ending $ 10,900 $ 20,700 $25,500 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

Solution

Mason company
Schedule of Cost of Goods Manufactured
Direct Material
Raw material Inventory Beginning	$ 9,000
Raw material Purchased	$ 138,000
Raw material available for use	$ 147,000
Less: Raw material Inventory Ending	$ 10,900
Direct Material Used		$ 136,100
Direct labor		$ 87,000
Total Manufacturing overheads applied		$ 201,000
Total manufacturing Cost During the month		$ 424,100
Add: Work in process Beginning		$ 5,800
Total Work in Process		$ 429,900
Less: Work in progress Ending		$ 20,700
Cost of Goods Manufactured		$ 409,200

.

Mason company
Schedule of cost of goods sold
Beginning Finished Goods Inventory		$ 78,000
Add: Cost of goods manufactured		$ 409,200
Goods Available for sale		$ 487,200
Less :Ending Finished goods Inventory		$ 25,500
Unadjusted Cost of Goods Sold		$ 461,700
Underapplied Manufacturing overheads		$ 22,000
Adjusted cost of goods sold		$ 483,700

.

Mason company
Income statement
Sales revenue		$ 657,000
Less: Cost of goods sold		$ 483,700
Gross profit		$ 173,300
Selling and administrative expenses
Selling expenses	$ 101,000
Administrative expenses'	$ 45,000	$ 146,000
Net income		$ 27,300