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	$	218,000
Purchases of raw materials	$	261,000
Direct labor		?
Administrative expenses	$	156,000
Manufacturing overhead applied to work in process	$	364,000
Actual manufacturing overhead cost	$	352,000

Inventory balances at the beginning and end of the year were as follows:

	Beginning of Year			End of Year
Raw materials	$	55,000		$	37,000
Work in process		?		$	31,000
Finished goods	$	39,000			?

The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $750,000; the unadjusted cost of goods sold totaled $669,000; and the net operating income was $39,000. The company’s underapplied or overapplied overhead is closed to Cost of Goods Sold.

Required:
Prepare an income statement for the year. Superior Company Income Statement Selling and administrative expenses:

Answer 1

Income Statement
Sales		1070000
Cost of goods sold		657000
Gross margin .		413000
Selling and administrative expenses:
Selling expenses	218000
Administrative expense	156000	374000
Net operating income		39000
Schedule of Cost of Goods Sold
Finished goods inventory, beginning		39000
Add: Cost of goods manufactured		711000
Cost of goods available for sale		750000
Deduct: Finished goods inventory, ending		81000
Unadjusted cost of goods sold		669000
Less: Overapplied overhead		12000
Adjusted cost of goods sold		657000
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	55000
Add: Purchases of raw materials	261000
Total raw materials available	316000
Deduct: Raw materials inventory, ending	37000
Raw materials used in production		279000
Direct labor		32000
Manufacturing overhead applied to work in process inventory		364000
Total manufacturing costs		675000
Add: Beginning work in process inventory		67000
		742000
Deduct: Ending work in process inventory		31000
Cost of goods manufactured		711000