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	$	211,000
Purchases of raw materials	$	260,000
Direct labor		?
Administrative expenses	$	158,000
Manufacturing overhead applied to work in process	$	366,000
Actual manufacturing overhead cost	$	355,000

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

	Beginning of Year			End of Year
Raw materials	$	51,000		$	35,000
Work in process		?		$	30,000
Finished goods	$	34,000			?

The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $663,000; and the net operating income was $34,000. 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

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

1.

SUPERIOR COMPANY
Income Statement
	$	$
Sales		1,055,000.00
Less: Cost of goods sold		652,000.00
Gross margin		403,000.00
Selling and administrative expenses:
Selling Expenses	211,000.00
Administrative Expense	158,000.00	369,000.00
Net operating income (Given)		34,000.00

2.

SUPERIOR COMPANY
Schedule of cost of goods sold
	$
Beginning Finished Goods	34,000.00
Add: Cost of goods manufactured	706,000.00
Cost of goods available for sale	740,000.00
Less: Ending Finished Goods	(77,000.00)
Unadjusted Cost of goods sold	663,000.00
Less: Over applied overhead ($355,000 ‒$366,000)	(11,000.00)
Adjusted Cost of goods sold	652,000.00

3.

SUPERIOR COMPANY
SCHEDULE OF COST OF GOODS MANUFACTURED
	$	$
Direct materials:
Beginning Raw materials inventory	51,000.00
Add: Raw materials purchases	260,000.00
Raw materials available for use	311,000.00
Less: Ending Raw materials inventory	(35,000.00)
Raw materials used in production		276,000.00
Direct labor (675,000-366,000-276,000)		33,000.00
Manufacturing Overhead applied to work in process		366,000.00
Total manufacturing costs (Given)		675,000.00
Add: Beginning Work in process inventory		61,000.00
Total cost of work in process		736,000.00
Less: Ending Work in process inventory		(30,000.00)
Cost of goods manufactured		706,000.00