Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ $ 219,000 267,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ $ $ 153,000 362,000 351,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of End of Year $ 55,000 $ 32,000 ? $ 29,000 $ 31,000 21000 The total manufacturing costs for the year were $675,000, the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $663,000; 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

SUPERIOR COMPANY Income Statement Sales Less: adjusted Cost of Goods Sold Gross Margin Selling and administrative Expenses Selling Expenses $ Administrative Expenses S S S S 1,062.000 652,000 410.000 219,000 153,000 $ S 372.000 38.000 Net Operative Income SUPERIOR COMPANY Schedule Cost of goods Sold Finished goods inventory, beginning 31,000 Add: Cost of Goods manufactured S 699,000 Cost of goods available for sale $ 730,000 Less: Finished goods inventory, ending $ 67,000 Unadjusted cost of goods sold S 663,000 Less: Over applied overhead $ 11,000 Adjusted Cost of goods sold S 652,000 Note : Over Applied Overhead =Manufacturing overhead applied to work in process - Actual manufacturing overhaed cost = $362,000-$351,000 = $11,000

SUPERIOR COMPANY Schedule Cost of goods Manufactured Schedule Direct Material : Raw Material inventory Beginning $ 55,000 Add: Raw materials purchases $ 267,000 Raw materials available $ 322,000 Less: Raw materials inventory Ending $ 32.000 Raw Materials used in production Direct Labour Manufacturing overhead applied to work in Process Total Manufacturing Costs Add: Work in process inventory Beginning Less: work in process inventory Ending Cost of goods Manufactured $ $ S $ $ $ $ 290,000 23,000 362.000 675,000 53,000 29,000 699,000