Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ 212,000 $ 268,000 ? Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 153,000 $ 370,000 $ 357,000

Prepare an income statement
prepare schedule of cost of goods sold
Prepare:

Answer 1

Cost of goods manufactured, cost of goods sold and Income Statement is as prepared below:

Cost of goods manufactured is calculated by adding Direct Material, Direct labour and Manufacturing overhead.

Cost of goods sold is calculated by adding opening finished goods and deducting closing finished goods to cost of goods manufactured.

Superior Company
Statement of Cost of goods manufactured
For the year ending December 31
Particulars	Amount ($)	Amount ($)
Direct Materials:
Opening Material	55,000
Add: Direct Material purchase	268,000
Total raw material available	323,000
Less: Closing Direct Material	31,000
Raw material used in production		292,000
Direct Labour Cost (680,000-370,000-292,000)		18,000
Manufacturing Overhead applied to WIP inventory		370,000
Total manufacturing Costs		680,000
Add: Beginning Work in Process (718,000+27,000-680,000)	65,000
Less: Closing Work in Process	27,000
Cost of goods manufactured		718,000

Superior Company
Schedule of Cost of goods sold
For the year ending December 31
Particulars	Amount ($)	Amount ($)
Opening finished goods inventory	32,000
Add: Cost of goods manufactured (750,000-32,000)	718,000
Total goods available for sale	750,000
Less: Closing finished goods inventory (750,000-660,000)	90,000
Unadjusted Cost of goods sold	660,000
Less: Overapplied overhead	-13,000
Adjusted Cost of goods sold		647,000

Particulars	Amount ($)
Applied Manufacturing Overhead	370,000
Actual manufacturing overhead	357,000
Overapplied overhead	13,000

Superior Company
Income Statement
For the year ending December 31
Particulars	Amount ($)	Amount ($)
Sales (647,000+403,000)		1,050,000
Less: Cost of goods sold		647,000
Gross margin (Net Income +Admin exp+Selling exp)		403,000
Selling and administrative expenses
Selling expenses	212,000
Administrative expenses	153,000
Net operating Income		38,000