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 $ 213,000 Purchases of raw materials $ 269,000 Direct labor ? Administrative expenses $ 152,000 Manufacturing overhead applied to work in process $ 373,000 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 $ 60,000 $ 32,000 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 $750,000; the unadjusted cost of goods sold totaled $665,000; 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		1047000
Cost of goods sold		647000
Gross margin .		400000
Selling and administrative expenses:
Selling expenses	213000
Administrative expense	152000	365000
Net operating income		35000
Schedule of Cost of Goods Sold
Finished goods inventory, beginning		34000
Add: Cost of goods manufactured		716000
Cost of goods available for sale		750000
Deduct: Finished goods inventory, ending		85000
Unadjusted cost of goods sold		665000
Less: Overapplied overhead		18000
Adjusted cost of goods sold		647000
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	60000
Add: Purchases of raw materials	269000
Total raw materials available	329000
Deduct: Raw materials inventory, ending	32000
Raw materials used in production		297000
Direct labor		5000
Manufacturing overhead applied to work in process inventory		373000
Total manufacturing costs		675000
Add: Beginning work in process inventory		71000
		746000
Deduct: Ending work in process inventory		30000
Cost of goods manufactured		716000