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	$	211,000
Purchases of raw materials	$	266,000
Direct labor		?
Administrative expenses	$	156,000
Manufacturing overhead applied to work in process	$	367,000
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	$	56,000		$	32,000
Work in process		?		$	31,000
Finished goods	$	36,000			?

The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $662,000; and the net operating income was $32,000. 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

Solution

Superior company
Schedule of Cost of Goods Manufactured
Direct Material
Raw material Inventory Beginning	$        56,000.00
Raw material Purchased	$     266,000.00
Raw material available for use	$     322,000.00
Less: Raw material Inventory Ending	$        32,000.00
Direct Material Used		$      290,000.00
Direct labor		$         28,000.00
Total Manufacturing overheads Applied		$      367,000.00
Total manufacturing Cost During the month		$      685,000.00
Add: Work in progess Beginning		$         50,000.00
Total Work in Process		$      735,000.00
Less: Work in progress Ending		$         31,000.00
Cost of Goods Manufactured		$      704,000.00

.

Superior company
Schedule of cost of goods sold
Beginning Finished Goods Inventory		$         36,000.00
Add: Cost of goods manufactured		$      704,000.00
Goods Available for sale		$      740,000.00
Less :Ending Finished goods Inventory		$         78,000.00
Unadjusted Cost of Goods Sold		$      662,000.00
Overapplied Manufacturing overheads		$      (13,000.00)
Adjusted cost of goods sold		$      649,000.00

.

Superior company
Income statement
Sales revenue		$   1,048,000.00
Less: Cost of goods sold		$      649,000.00
Gross profit		$      399,000.00
Selling and administrative expenses
Selling expenses	$     211,000.00
Administrative expenses'	$     156,000.00	$      367,000.00
Net income		$         32,000.00