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 Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 217,000 $ 269,000 ? $ 157,000 $ 375,000 $ 358,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year End of Year $ 58,000 $ 38,000 ? $ 27,000 $ 31,000 ? The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $668,000; and the net operating income was $36,000. 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 revenue		1061000
Cost of goods sold (668000-17000)		651000
Gross profit		410000
Selling and administrative expense
Selling expense	217000
Administrative expense	157000
Total Selling and administrative expense		374000
Net operating income		36000

2) Schedule cost of goods sold

Beginning finished goods	31000
Cost of goods manufactured	704000
Cost of goods available for sale	735000
Ending finished goods	67000
Unadjusted cost of goods sold	668000
Less: over applied overhead	-17000
Adjusted cost of goods sold	651000

3) Schedule of cost of goods manufactured

Direct material
Beginning raw material	58000
Raw material purchase	269000
Raw material available for use	327000
Less; Ending raw material	-38000
Direct material used		289000
Direct labor		21000
Manufacturing overhead applied		375000
Total manufacturing cost		685000
Beginning work in process		46000
Total cost of work in process		731000
Ending work in process		27000
Cost of goods manufactured		704000