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 $ 651,000 $ 88,000 $ 134,000 $ 105,000 $ 43,000 $ 205,000 $ 221,000 Inventories Raw materials Work in process Finished goods Beginning $ 8,800 $ 5,400 $ 74,000 Ending $ 10,100 $ 20,500 $ 25, 200 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

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	Mason Company
	Schedule of Cost of goods Manufactured
	Direct Materials
	Raw Material Inventory beginning	$         8,800
Add:	Purchases of raw Material	$   1,34,000
	Total Raw Material available	$   1,42,800
Less:	Raw Material Inventory ending	$       10,100
	Raw Material used in production		$   1,32,700
	Direct Labor		$       88,000
	Manufacturing overhead		$   2,05,000
	Total manufacturing cost		$   4,25,700
Add:	Beginning work in process inventory		$         5,400
			$   4,31,100
Less:	Ending work in process inventory		$       20,500
	Cost of goods manufactured		$   4,10,600
	Mason Company
	Schedule of Cost of Goods Sold
	Finished Goods Inventory Beginning	$       74,000
Add:	Cost of goods manufactured	$   4,10,600
	Cost of goods available for sale	$   4,84,600
Less:	Finished Goods Inventory Ending	$       25,200
	Unadjusted cost of goods sold	$   4,59,400
Add:	Underapplied Overheads	$       16,000
	Adjusted cost of goods sold	$   4,75,400
	Workings:
2	Underapplied Overheads = Actual Manufacturing overheads - Manufacturing overheads applied
	Underapplied Overheads = $221000 - $2,05,000 = $16,000
	Mason Company
	Income Statement
	Sales		$   6,51,000
Less:	Cost of Goods Sold		$   4,75,400
	Gross Margin		$   1,75,600
Less:	Selling and Administrative Expenses:
	Selling Expense	$   1,05,000
	Administrative Expense	$       43,000	$   1,48,000
	Net Operating Income		$       27,600