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	$	217,000
Purchases of raw materials	$	261,000
Direct labor		?
Administrative expenses	$	150,000
Manufacturing overhead applied to work in process	$	373,000
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	$	54,000		$	31,000
Work in process		?		$	28,000
Finished goods	$	37,000			?

The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $665,000; and the net operating income was $38,000. 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

Answer-

SUPERIOR COMPANY
COST OF GOODS MANUFACTURED REPORT
PARTICULARS	AMOUNT
	$
Beginning Raw Materials Invenotry	54000
Add- Raw Material Purchases	261000
Total raw materials available	315000
Less-Ending Raw Material Inventory	31000
Raw Materials Used in production	284000
Direct Labor	23000
Manufacturing Overhead applied to work in process	373000
Total current manufacturing costs	680000
Add- Beginning Work in Process Invenotry	55000
Total work in process	735000
Less- Ending Work in Process Invenotry	37000
Cost of goods manufactured	698000

SUPERIOR COMPANY
COST OF GOODS SOLD
PARTICULARS		Amount
		$
Beginning finished goods inventory		37000
Add: Cost of goods manufactured		698000
Cost of goods available for sale		735000
Less: Ending finished goods inventory		70000
Unadjusted Cost of goods sold		665000
Less- Overapplied overhead	($373000-$356000)	17000
Adjusted Cost of goods sold		648000

SUPERIOR COMPANY
INCOME STATEMENT
PARTICULARS	AMOUNT	AMOUNT
	$	$
Sales		1053000
Less-Cost of goods sold		648000
Gross margin		405000
Less- Selling & administrative expenses		367000
Selling expenses	217000
Administrative expenses	150000
Net Operating income		38000