Question

The following data from the just completed year are taken from the accounting records of Mason Company:

    

Sales$659,000

Direct labor cost$84,000

Raw material purchases$137,000

Selling expenses$108,000

Administrative expenses$43,000

Manufacturing overhead applied to work in process$201,000

Actual manufacturing overhead costs$230,000

InventoriesBeginningEnding

Raw materials$8,400$10,300

Work in process$5,900$20,300

Finished goods$72,000$25,300

Required:

1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.

2. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold.

3. Prepare an income statement.

Answer 1

|1) Mason Company Schedule of Cost of Goods Manufactured Direct Material Beginning Raw material inventory 8,400 Add: Raw material purchases $ 137,000 Total Raw material available 145,400 (10,300) Less : Ending Raw material inventory Direct material Used Direct Labour $ $ 135,100 $ 84,000 Manufacturing overhead applied to work in process Total Manufacturing Costs Add: Beginning Work in Process 201,000 420,100 5,900 $ 426,000 Less Ending Work in Process Cost of Goods Manufactured (20,300) $ 405,700

2) Mason 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 Add: Underapplied manufacturing overhead Adjusted Cost of Goods Sold $ 72,000 405,700 477,700 (25,300) $ 452,400 29,000 $ 481,400 Working Notes Calculation of Under applied Overhead Actual Manufacturing Overhead Less : Manufacturing overhead applied Under applied overhead $ 230,000 (201,000) $ $ 29,000

|3) Mason Company Income Statement Sales 659,000 (481,400) Less: Cost of Goods sold $ Gross Margin Less : Selling and Administrative expenses $ 177,600 $ (108,000) Selling expenses (43,000) $ (151,000) Administraive expenses $ Net Income 26,600