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 $ 214,000 Purchases of raw materials $ 263,000 Direct labor ? Administrative expenses $ 151,000 Manufacturing overhead applied to work in process $ 377,000 Actual manufacturing overhead cost $ 360,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 57,000 $ 37,000 Work in process ? $ 29,000 Finished goods $ 38,000 ? The total manufacturing costs for the year were $685,000; 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

Income Statement
Sales		1047000
Cost of goods sold		649000
Gross margin .		398000
Selling and administrative expenses:
Selling expenses	214000
Administrative expense	151000	365000
Net operating income		33000
Schedule of Cost of Goods Sold
Finished goods inventory, beginning		38000
Add: Cost of goods manufactured		707000
Cost of goods available for sale		745000
Deduct: Finished goods inventory, ending		79000
Unadjusted cost of goods sold		666000
Less: Overapplied overhead		17000
Adjusted cost of goods sold		649000
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	57000
Add: Purchases of raw materials	263000
Total raw materials available	320000
Deduct: Raw materials inventory, ending	37000
Raw materials used in production		283000
Direct labor		25000
Manufacturing overhead applied to work in process inventory		377000
Total manufacturing costs		685000
Add: Beginning work in process inventory		51000
		736000
Deduct: Ending work in process inventory		29000
Cost of goods manufactured		707000