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 $524,000 $ 70,000 $118,000 $140,000 $ 63,000 $ 90,000 $ 80,000 Inventories Raw materials Work in process Finished goods Beginning $ 7,000 $ 10,000 $ 20,000 $ $ $ Ending 15,000 5,000 35,000 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

1.

MASON COMPANY Schedule of Cost of Goods Manufactured
Beginning raw materials	$7,000
Raw material purchases	118,000
Ending raw materials	(15,000)
Direct material used	120,000
Direct labor cost	70,000
Manufacturing overhead applied	90,000
Total manufacturing costs		280,000
Beginning work in process		10,000
Ending work in process		(5,000)
Cost of goods manufactured		$285,000

2.

MASON COMPANY Schedule of Cost of Goods Sold
Beginning finished goods	$20,000
Total manufacturing costs	285,000
Ending finished goods	(35,000)
Cost of goods sold	$270,000

3.

MASON COMPANY Income Statement
Sales		$524,000
Cost of goods sold		(270,000)
Gross profit		254,000
Selling and administrative expense:
Selling expense	$140,000
Administrative expense	63,000	(203,000)
Net income		$51,000