Question

The following data from the just completed year are taken from the accounting records of Mason Company: Sales $ 653,000 Direct labor cost $ 82,000 Raw material purchases $ 137,000 Selling expenses $ 106,000 Administrative expenses $ 40,000 Manufacturing overhead applied to work in process $ 202,000 Actual manufacturing overhead costs $ 226,000 Inventories Beginning Ending Raw materials $ 8,900 $ 10,900 Work in process $ 5,000 $ 20,300 Finished goods $ 70,000 $ 25,800

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

Solution

Mason company
Schedule of Cost of Goods Manufactured
Direct Material
Raw material Inventory Beginning	$ 8,900
Raw material Purchased	$ 137,000
Raw material available for use	$ 145,900
Less: Raw material Inventory Ending	$ 10,900
Direct Material Used		$ 135,000
Direct labor		$ 82,000
Manufacturing overheads applied		$ 202,000
Total manufacturing Cost During the month		$ 419,000
Add: Work in process Beginning		$ 5,000
Total Work in Process		$ 424,000
Less: Work in progress Ending		$ 20,300
Cost of Goods Manufactured		$ 403,700

.

Mason company
Schedule of cost of goods sold
Beginning Finished Goods Inventory		$ 70,000
Add: Cost of goods manufactured		$ 403,700
Goods Available for sale		$ 473,700
Less :Ending Finished goods Inventory		$ 25,800
Unadjusted Cost of Goods Sold		$ 447,900
Underapplied Manufacturing overheads		$ 24,000
Adjusted cost of goods sold		$ 471,900

.

Mason company
Income statement
Sales revenue		$ 653,000
Less: Cost of goods sold		$ 471,900
Gross profit		$ 181,100
Selling and administrative expenses
Selling expenses	$ 106,000
Administrative expenses'	$ 40,000	$ 146,000
Net income		$ 35,100