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 Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 215,000 $ 264,000 ? $ 159,000 $ 371,000 $ 356,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year End of Year $ 52,000 $ 31,000 $ 27,000 $ 36,000 The total manufacturing costs for the year were $690,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $668,000; and the net operating income was $35,000. 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

Income Statement
Sales		1062000
Cost of goods sold		653000
Gross margin .		409000
Selling and administrative expenses:
Selling expenses	215000
Administrative expense	159000	374000
Net operating income		35000
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		67000
Unadjusted cost of goods sold		668000
Less: Overapplied overhead		15000
Adjusted cost of goods sold		653000
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	52000
Add: Purchases of raw materials	264000
Total raw materials available	316000
Deduct: Raw materials inventory, ending	31000
Raw materials used in production		285000
Direct labor		34000
Manufacturing overhead applied to work in process inventory		371000
Total manufacturing costs		690000
Add: Beginning work in process inventory		36000
		726000
Deduct: Ending work in process inventory		27000
Cost of goods manufactured		699000