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 $ 217,000 Purchases of raw materials $ 269,000 Direct labor ? Administrative expenses $ 154,000 Manufacturing overhead applied to work in process $ 366,000 Actual manufacturing overhead cost $ 354,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 57,000 $ 40,000 Work in process ? $ 31,000 Finished goods $ 39,000 ? The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $661,000; and the net operating income was $30,000. 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.) Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): Selling expenses $ 217,000 Purchases of raw materials $ 269,000 Direct labor ? Administrative expenses $ 154,000 Manufacturing overhead applied to work in process $ 366,000 Actual manufacturing overhead cost $ 354,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 57,000 $ 40,000 Work in process ? $ 31,000 Finished goods $ 39,000 ? The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $661,000; and the net operating income was $30,000. 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

Superior Company
Income Statement
Sales		$1050000
Less: Cost of goods sold (661000-12000)		-649000
Gross profit (371000+30000)		401000
Less: Selling and administrative expenses:
Selling expenses	217000
Administrative expenses	154000
Total selling and administrative expenses		-371000
Net operating income		$30000

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

= $366000-354000= $12000 overapplied

Superior Company
Schedule of Cost of Goods Sold
Beginning finished goods inventory	$39000
Add: Cost of goods manufactured (745000-39000)	706000
Cost of goods available for sale	745000
Less: Ending finished goods inventory (745000-661000)	-84000
Unadjusted cost of goods sold	661000
Less: Overapplied overhead	-12000
Adjusted cost of goods sold	$649000

Superior Company
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	$57000
Add: Purchases of raw materials	269000
Total raw materials available	326000
Less: Ending raw materials inventory	-40000
Raw materials used in production		$286000
Direct labor (675000-286000-366000)		23000
Manufacturing overhead applied to work in process		366000
Total manufacturing costs		675000
Add: Beginning work in process inventory (737000-675000)		62000
Total cost of work in process (706000+31000)		737000
Less: Ending work in process inventory		-31000
Cost of goods manufactured		$706000