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	$	220,000
Purchases of raw materials	$	267,000
Direct labor		?
Administrative expenses	$	153,000
Manufacturing overhead applied to work in process	$	376,000
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	$	52,000		$	33,000
Work in process		?		$	31,000
Finished goods	$	35,000			?

The total manufacturing costs for the year were $670,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $663,000; and the net operating income was $38,000. 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.)

• Income Statement
• COGS Schedule
• COGM Schedule

Prepare an income statement for the year.

Prepare a schedule of cost of goods sold.

Prepare a schedule of cost of goods manufactured.

Answer 1

Schedule of Cost of Goods Manufactured 52000 267000 -33000 Opening RM Purchases of RM Closing RM RM consumed / Direct Materials Add: Direct Labour Prime Cost Add: Factory Overhead Total Manufacturing Cost Add: Opening WIP Less: Closing WIP Cost of Goods Manufactured (294000-286000) (670000-376000) 286000 8000 294000 376000 670000 66000 31000 705000 (74000+32000-670000) (740000-35000) Schedule of Cost of Goods Sold Opening Finished Goods Add: Cost of Goods Manufactured Goods Available for Sales Closing Finished Goods Cost of goods sold (unadjusted) Less: Overapplied overhead Cost of goods sold (adjusted) 35000 705000 740000 77000 663000 16000 647000 Income Statement 1058000 647000 411000 Revenue Less: Cost of Goods Sold Gross Profit Less Expenses Selling Administrative Net Income 220000 153000 38000