Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ 211,000 $ 268,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 156,000 $ 364,000 $ 353,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year $ 55,000 7 $ 33,000 End of Year $ 36,000 $28,000 The total manufacturing costs for the year were $670,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $666,000; 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.) X Answer is not complete. Complete this question by entering your answers in the tabs below. Income Statement COGS Schedule COGM Schedule

Answer 1

Answer -

1. Answer -

Income Statement:

Superior Company
Income Statement
Sales		$1056000
Cost of goods sold		$655000
Gross margin		$401000
Selling and administrative expenses:
Selling expenses	$211000
Administrative expenses	$156000
		$367000
Net operating income		$34000

Calculation:

1. Overapplied overhead:

= Manufacturing overhead applied to work in process - Actual manufacturing overhead cost

= $364000 - $353000

= $11000

2. Cost of goods sold:

= Unadjusted cost of goods sold - Overapplied overhead

= $666000 - $11000

= $655000

5. Gross margin:

= Selling expenses + Administrative expenses + Net operating income

= $211000 + $156000 + $34000

= $401000

4. Sales:

= Cost of goods sold + Gross margin

= $655000 + $401000

= $1056000

2. Answer -

Schedules of Cost of Goods Sold:

Superior Company
Schedule of Cost of Goods Sold
Beginning finished goods inventory	$33000
Add: Cost of goods manufactured	$697000
Cost of goods available for sale	$730000
Less: Ending finished goods inventory	$64000
Unadjusted cost of goods sold	$666000
Less: Overapplied overhead	$11000
Adjusted cost of goods sold	$655000

Calculation:

1. Cost of goods manufactured:

= Cost of goods available for sale - Beginning finished goods inventory

= $730000 - $33000

= $697000

2. Ending finished goods inventory:

= Cost of goods available for sale - Unadjusted cost of goods sold

= $730000 - $666000

= $64000

3. Adjusted cost of goods sold:

= Unadjusted cost of goods sold - Overapplied overhead

= $666000 - $11000

= $655000

3. Answer -

Schedules of Cost of Goods Manufactured:

Superior Company
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	$55000
Add: Purchase of raw materials	$268000
Total raw materials available	$323000
Less: Ending raw materials inventory	$36000
Raw materials used in production		$287000
Direct labor		$19000
Manufacturing overhead applied to work in process		$364000
Total manufacturing overhead costs		$670000
Add: Beginning work in process inventory		$55000
		$725000
Less: Ending work in process inventory		$28000
Cost of goods manufactured		$697000

Calculating:

1. Total raw materials available:

= Beginning raw materials inventory + Purchases of raw materials

= $55000 + $268000

= $323000

2. Raw materials used in production:

= Total raw materials available - Ending raw materials inventory

= $323000 - $36000

= $287000

3. Direct labor:

= Total manufacturing costs - Raw materials used in production - Manufacturing overhead applied to work in process

= $670000 - $287000 - $364000

= $19000

4. Beginning work in process inventory:

= [Cost of goods manufactured + Ending work in process inventory] - Total manufacturing costs

= [$697000 + $28000] - $670000

= $55000

And

= Total manufacturing costs + Beginning work in process inventory

= $670000 + $55000

= $725000