Question

The following data from the just completed year are taken from the accounting records of Mason Company Sales Direct labor cost Raw material purchases Selling expenses Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead costs $ 655,000 $ 86,000 $ 138,000 $ 105,000 $ 47,000 $ 286,000 $ 222,000 Inventories Raw materials Work in process Finished goods Beginning Ending $ 8,300 $ 10,309 $ 5,700 $ 20,400 $ 74,089 526,000 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

MASON COMPANY Schedule of Cost of goods Manufactured Direct Material Raw Material inventory Beginning S 8.300 Add: Raw materials purchases S 138.000 Total Raw materials available S 146,300 Less: Raw materials inventory Ending S 10,300 Raw Materials used in production Direct Labour Manufacturing overhead applied Total Manufacturing Costs Add: Work in process inventory Beginning Less: work in process inventory Ending Cost of goods Manufactured $ $ $ $ $ $ S 136,000 86,000 206,000 428,000 5,700 20,400 454.100

MASON COMPANY Schedule of Cost of goods Sold Finished goods inventory, beginning 74.000 Add: Cost of Goods manufactured S 454,100 Cost of goods available for sale S 528.100 Less: Finished goods inventory, ending $ 26,000 Unadjusted cost of goods sold $ 554.100 Add: Under applied overhead $ 16,000 Adjusted Cost of goods sold $ 570.100 Note : Under Applied Overhead =Actual manufacturing overhaed cost-Manufacturing overhead applied to work in process = $222,000-$206,000 = $16,000 MASON COMPANY Income Statement Sales Less: Cost of Goods Sold Gross Margin Less: Selling and administrative Expenses Selling Expenses $ Administrative Expenses $ Net Operative Income $ $ $ 655,000 570.100 84,900 105,000 47,000S 152.000 S (67,100)|