Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ 219,000 268,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost 153,000 5 366,000 $ 353,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning $ 60,000 ? $ 31,000 Ending $ 35,000 $ 28,000 ? The total manufacturing costs added to production for the year were $675,000, the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $660,000; and the net operating income was $38,000. The company's underapplied or overapplied overhead is closed to cost of Goods Sold.

Answer 1

SUPERIOR COMPANY Income Statement
Sales		$ 1,057,000 ( $ 647,000 + $ 410,000 )
Cost of goods sold		($ 647,000)
Gross margin		$ 410,000
Less: Selling and administrative expenses:
- Selling expenses	$ 219,000
- Administrative expense	$ 153,000	($ 372,000)
Net operating income		$ 38,000

SUPERIOR COMPANY Schedule of Cost of Goods Sold
Finished goods inventory, Beginning	$ 31,000
Add: Cost of goods manufactured ( $ 735,000 (-) $ 31,000)	$ 704,000
Cost of goods available for sale	$ 735,000
Less : Finished goods inventory, Ending	($ 75,000) ( $ 735,000 (-) $ 660,000 )
Unadjusted cost of goods sold	$ 660,000
Less : Overapplied overhead               ( $ 353,000 (-) $ 366,000 )	($ 13,000)
Adjusted cost of goods sold	$ 647,000

SUPERIOR COMPANY Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, Beginning	$ 60,000
Add: Purchases of raw materials	$ 268,000
Total raw materials available	$ 328,000
Less : Raw materials inventory, Ending	($ 35,000)
Raw materials used in production		$ 293,000
Direct labor ( $ 675,000 (-) $ 293,000 (-) $ 366,000 )		$ 16,000
Manufacturing overhead applied to work in process inventory		$ 366,000
Total Manufacturing costs		$ 675,000
Add: Beginning work in process inventory		$ 57,000 ( $ 732,000 (-) $ 675,000 )
		$ 732,000
Less : Ending work in process inventory		($ 28,000)
Cost of Goods manufactured		$ 704,000