Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ 213,000 $ 266,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 153,000 $ 371,000 $360,000 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 $ 52,000 $40,000 7 $ 29,000 $ 30,000 The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $725,000; 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

SUPERIOR COMPANY Income Statement Sales Less: adjusted Cost of Goods Sold Gross Margin Selling and administrative Expenses Selling Expenses Administrative Expenses $ $ $ 1,059,000 657,000 402,000 $ $ 213,000 153,000 S $ 366,000 36,000 Net Operative Income SUPERIOR COMPANY Schedule Cost of goods Sold Finished goods inventory, beginning 30,000 Add: Cost of Goods manufactured 695,000 Cost of goods available for sale $ 725,000 Less: Finished goods inventory, ending S 57,000 Unadjusted cost of goods sold 668,000 Less: Over applied overhead $ 11,000 Adjusted Cost of goods sold $ 657,000 Note : Over Applied Overhead =Manufacturing overhead applied to work in process - Actual manufacturing overhaed cost = $371,000-$360,000 = $11,000

SUPERIOR COMPANY Schedule Cost of goods Manufactured Schedule Direct Material: Raw Material inventory Beginning $ 52,000 Add: Raw materials purchases $ 266,000 Raw materials available $ 318,000 Less: Raw materials inventory Ending $ 40,000 Raw Materials used in production Direct Labour Manufacturing overhead applied to work in Process Total Manufacturing Costs Add: Work in process inventory Beginning Less: work in process inventory Ending Cost of goods Manufactured $ $ $ $ S $ S 278,000 26,000 371,000 675,000 49,000 29,000 695,000