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 $ 212,000 Purchases of raw materials $ 261,000 Direct labor ? Administrative expenses $ 159,000 Manufacturing overhead applied to work in process $ 369,000 Actual manufacturing overhead cost $ 350,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 52,000 $ 38,000 Work in process ? $ 25,000 Finished goods $ 36,000 ? The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $662,000; 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

1.

Income Statement
Sales		$1,052,000
Cost of goods sold		643,000
Gross profit		409,000
Selling and administrative expenses
Selling expenses	$212,000
Administrative expenses	159,000	371,000
Net operating income		$38,000

Adjusted cost of goods sold = Unadjusted cost of goods sold - Overapplied overhead

Adjusted cost of goods sold = $662,000 - 19,000 = $643,000

2.

Schedule of Cost of Goods Sold
Beginning finished goods inventory	$36,000
Cost of goods manufactured	694,000
Cost of goods available for sale	730,000
Ending finished goods inventory	(68,000)
Unadjusted cost of goods sold	662,000
Overapplied overhead	(19,000)
Adjusted cost of goods sold	$643,000

3.

Schedule of Cost of Goods Manufactured
Beginning raw material	$52,000
Purchases of raw material	261,000
Raw material available	313,000
Ending raw material	(38,000)
Direct material used		275,000
Direct labor		41,000
Manufacturing overhead applied		369,000
Total manufacturing cost		685,000
Beginning work in process ($694,000+25,000-685,000)		34,000
Ending work in process		(25,000)
Cost of goods manufactured		694,000