Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ 217,000 $ 263,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 158,000 $ 375,000 $ 355,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year End of Year $ 56,000 $ 30,000 ? $ 28,000 $ 37,000 The total manufacturing costs for the year were $670,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $662,000; 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.)

Answer 1

1) Income statement

Sales		1055000
Cost of goods sold (662000-20000)		642000
Gross profit		413000
Selling and administrative expense
Selling expense	217000
Administrative expense	158000
Total Selling and administrative expense		375000
Net income		38000

2) Schedule of cost of goods sold

Beginning finished goods	37000
Cost of goods manufactured	708000
Cost of goods available for sale	745000
Ending finished goods	83000
Unadjusted cost of goods sold	662000
Less: Over applied overhead	-20000
Adjusted cost of goods sold	642000

3) Schedule of cost of goods manufactured

Direct material used
Beginning Direct material	56000
Purchase of material	263000
Material available	319000
Less; Ending direct material	-30000
Direct material used		289000
Direct labor		6000
Applied overhead		375000
Total manufacturing cost		670000
Beginning work in process		66000
Total cost of work in process		736000
Ending work in process		28000
Cost of goods manufactured		708000