Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ $ 213,000 268,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 157,000 $ 363,000 $ 351,000 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 $ 59,000 $ 31,000 ? $ 31,000 $ 36,000 The total manufacturing costs for the year were $690,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $669,000, and the net operating income was $37,000. 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		1064000
Cost of goods sold (669000-12000)		657000
Gross profit		407000
Selling and administrative expense
Selling expense	213000
Administrative expense	157000
Total Selling and administrative expense		370000
Net income		37000

2) Schedule of cost of goods sold

Beginning finished goods	36000
Cost of goods manufactured	709000
Cost of goods available for sale	745000
Ending finished goods	76000
Unajdusted cost of goods sold	669000
Less: Over applied overhead	-12000
Adjusted cost of goods sold	657000

3) Schedule of cost of goods manufactured

Direct material
Beginning raw material	59000
Raw material purchase	268000
Raw material available for use	327000
Less: Ending raw material	-31000
Direct material used		296000
Direct labor		31000
Applied overhead		363000
Total manufacturing cost		690000
Beginning work in process		50000
Total cost of work in process		740000
Ending work in process		31000
Cost of goods manufactured		709000