Question

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

Sales	$	655,000
Direct labor cost	$	87,000
Raw material purchases	$	135,000
Selling expenses	$	101,000
Administrative expenses	$	46,000
Manufacturing overhead applied to work in process	$	207,000
Actual manufacturing overhead costs	$	223,000

Inventories	Beginning		Ending
Raw materials	$	8,600	$	10,200
Work in process	$	5,600	$	20,400
Finished goods	$	71,000	$	25,100

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
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	8600
Add: Purchases of raw materials	135000
Total raw materials available	143600
Less: Raw materials inventory, ending	10200
Raw materials used in production		133400
Direct labor		87000
Manufacturing overhead applied		207000
Total manufacturing costs		427400
Add: Beginning work in process inventory		5600
		433000
Less: Ending work in process inventory		20400
Cost of goods manufactured		412600
2
Schedule of Cost of Goods Sold
Finished goods inventory, beginning	71000
Add: Cost of goods manufactured	412600
Cost of goods available for sale	483600
Less: Finished goods inventory, ending	25100
Unadjusted cost of goods sold	458500
Add: Underapplied overhead	16000	=223000-207000
Adjusted cost of goods sold	474500
3
Income Statement
Sales		655000
Cost of goods sold		474500
Gross margin .		180500
Selling and administrative expenses:
Selling expenses	101000
Administrative expense	46000	147000
Net operating income		33500