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	$	215,000
Purchases of raw materials	$	261,000
Direct labor		?
Administrative expenses	$	156,000
Manufacturing overhead applied to work in process	$	368,000
Actual manufacturing overhead cost	$	353,000

Inventory balances at the beginning and end of the year were as follows:

	Beginning			Ending
Raw materials	$	55,000		$	38,000
Work in process		?		$	25,000
Finished goods	$	39,000			?

The total manufacturing costs added to production for the year were $675,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $665,000; 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

Income statement

Sales		1057000
Cost of goods sold (665000-15000)		650000
Gross profit		407000
Selling and administrative expense
Selling expense	215000
Administrative expense	156000
Total Selling and administrative expense		371000
Net operating income		36000

Schedule of cost of goods sold

Beginning finished goods	39000
Cost of goods manufactured	691000
Cost of goods available for sale	730000
Less: Ending finished goods	65000
Unadjusted cost of goods sold	665000
Less; Over applied overhead	-15000
Adjusted cost of goods sold	650000

Schedule of cost of goods manufactured

Direct material used
Beginning raw material	55000
Raw material purchase	261000
Raw material available for use	316000
Less: Ending raw material	-38000
Direct material used		278000
Direct labor		29000
Manufacturing overhead		368000
Total manufacturing cost		675000
Beginning WIP		41000
Total Cost of WIP		716000
Less: Ending WIP		25000
Cost of goods manufactured		691000