Question

The following data from the just completed year are taken from the accounting records of Mason Company: Sales Direct labor cost Raw material purchases Selling expenses Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead costs $ 656,000 $ 89,000 $ 130,000 $ 101,000 $ 41,000 $ 204,000 $ 223,000 Inventories Raw materials Work in process Finished goods Beginning $ 8,600 $ 5,200 $ 77,000 Ending $ 10,100 $ 20,800 $ 25,900 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

Schedule of cost of goods manufactured

Direct material used
Beginning raw material	8600
Raw material purchase	130000
Raw material available for use	138600
Less; Ending raw material	-10100
Direct material used		128500
Direct labor		89000
Applied overhead		204000
Total manufacturing cost		421500
Beginning work in process		5200
Total cost of work in process		426700
Less: Ending work in process		20800
Cost of goods manufactured		405900

Schedule of cost of goods sold

Beginning finished goods	77000
Cost of goods manufactured	405900
Cost of goods available for sale	482900
Ending finished goods	-25900
Unadjusted cost of goods sold	457000
Add: Under applied overhead	19000
Adjusted cost of goods sold	476000

Income statement

Sales revenue		656000
Cost of goods sold		476000
Gross profit		180000
Selling and administrative expense
Selling expense	101000
Administrative expense	41000
Total Selling and administrative expense		142000
Net operating income		38000