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	$	215,000
Purchases of raw materials	$	263,000
Direct labor		?
Administrative expenses	$	155,000
Manufacturing overhead applied to work in process	$	372,000
Actual manufacturing overhead cost	$	356,000

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

	Beginning of Year			End of Year
Raw materials	$	60,000		$	34,000
Work in process		?		$	29,000
Finished goods	$	36,000			?

The total manufacturing costs for the year were $670,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $660,000; and the net operating income was $32,000. 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.)

• Income Statement
• COGS Schedule
• COGM Schedule

Prepare an income statement for the year.

	Superior Company Income Statement Selling and administrative expenses:

  

• COGS Schedule
• COGM Schedule

• Prepare a schedule of cost of goods sold.

  	Superior Company Schedule of Cost of Goods Sold    Adjusted cost of goods sold

• COGM Schedule

Prepare a schedule of cost of goods manufactured.

	Superior Company Schedule of Cost Goods Manufactured Direct materials: Total raw materials available Raw materials used in production Total manufacturing costs    Cost of goods manufactured

Answer 1

Income Statement
Sales		1046000
Cost of goods sold		644000
Gross margin .		402000
Selling and administrative expenses:
Selling expenses	215000
Administrative expense	155000	370000
Net operating income		32000
Schedule of Cost of Goods Sold
Finished goods inventory, beginning		36000
Add: Cost of goods manufactured		699000
Cost of goods available for sale		735000
Deduct: Finished goods inventory, ending		75000
Unadjusted cost of goods sold		660000
Less: Overapplied overhead		16000
Adjusted cost of goods sold		644000
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	60000
Add: Purchases of raw materials	263000
Total raw materials available	323000
Deduct: Raw materials inventory, ending	34000
Raw materials used in production		289000
Direct labor		9000
Manufacturing overhead applied to work in process inventory		372000
Total manufacturing costs		670000
Add: Beginning work in process inventory		58000
		728000
Deduct: Ending work in process inventory		29000
Cost of goods manufactured		699000