Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $220,000 $269,000 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 $350,000 Inventory balances at the beginning and end of the year were as follows: Beginning End of of Year Year Raw materials $58,000 $39,000 Work in ? $27,000 process Finished goods $39,000 The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $666,000, and the net operating income was $31,000. 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.) Complete this question by entering your answers in the tabs below. Income COGS COGM Statem... Schedule Schedule Prepare an income statement for the year. Superior Company Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: | Selling expenses Administrative expenses Manufacturing overhead Net operating income < Income Statement COGS

Answer 1

SUPERIOR COMPANY Schedule of Cost of Goods Manufactured Direct Materials: Beginning raw materials inventory 58,000 Add: Purchases of raw materials $ 269,000 Total raw materials available $ 327,000 Less: Ending raw materials inventory 39,000 Raw materials used in production Direct Labor Manufacturing Overhead applied to work in proces Total manufacturing costs Add: Beginning work in process inventory $ $ 288,000 22,000 375,000 685,000 43,000 728,000 27,000 701,000 Less: Ending work in process inventory Cost of Goods manufactured $ SUPERIOR COMPANY Schedule of Cost of Goods Sold Beginning finished goods inventory Add: Cost of Goods manufactured $ Cost of goods available for sale $ Less: Ending finished goods inventory $ Unadjusted cost of goods sold Less: Overapplied overhead Adjusted cost of goods sold 39,000 701,000 740,000 74,000 $ $ $ 666,000 19,000 647,000

SUPERIOR COMPANY Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses $ $ $ 1,056,000 647,000 409,000 $ $ 220,000 158,000 $ $ 378,000 31,000 Net Operating Income

Manufacturing costs = Raw materials used + Direct labor + Manufacturing overhead applied
$685,000 = $288,000 + Direct labor + $375,000
Direct labor = $22,000

Cost of goods available for sale = Beginning finished goods inventory + Cost of goods manufactured
$740,000 = $39,000 + Cost of goods manufactured
Cost of goods manufactured = $701,000

Cost of goods manufactured = Beginning work in process + Manufacturing costs - Ending work in process
$701,000 = Beginning work in process + $685,000 - $27,000
Beginning work in process = $43,000

Unadjusted cost of goods sold = Cost of goods available for sale - Ending finished goods inventory
$666,000 = $740,000 - Ending finished goods inventory
Ending finished goods inventory = $74,000

Overapplied overhead = Manufacturing overhead applied - Actual manufacturing overhead
Overapplied overhead = $375,000 - $356,000
Overapplied overhead = $19,000

Net operating income = Gross margin - Selling expenses - Administrative expenses
$31,000 = Gross margin - $220,000 - $158,000
Gross margin = $409,000

Gross Margin = Sales - Cost of Goods Sold
$409,000 = Sales - $647,000
Sales = $1,056,000