Question

The following data from the just completed year are taken from the accounting records of Mason Company:

Sales	$	651,000
Direct labor cost	$	82,000
Raw material purchases	$	137,000
Selling expenses	$	104,000
Administrative expenses	$	48,000
Manufacturing overhead applied to work in process	$	221,000
Actual manufacturing overhead costs	$	200,000

Inventories	Beginning		Ending
Raw materials	$	8,300	$	10,400
Work in process	$	5,700	$	20,200
Finished goods	$	74,000	$	25,800

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

1 Mason Company Schedule of Cost of Goods Manufactured Direct Material Beginning raw material inventory $ 8,300 Add: Purchase of raw materials $ 137,000 Total Raw Materials Available $ 145,300 Deduct: Ending Raw Materials Inventory $ 10,400 Raw Materials used Direct Labor Cost Manufacturing Overhead applied to work in progress Total manufacturing costs Add: beginning Work in Process inventory Sub Total Deduct: Ending Work in Process inventory Cost of Goods Manufactured $ $ $ $ $ $ $ $ 134,900 82,000 221,000 437,900 5,700 443,600 20,200 423,400 N Mason Company Schedule of Cost of Goods sold Beginning Finished Goods inventory Add: Cost of Goods Manufactured Costs of goods available for sale Deduct: Ending Finished goods inventory Unadjusted Cost of Goods sold Deduct: Overapplied manufacturing overhead Adjusted Cost of Goods sold $ $ $ $ 74,000 423,400 497,400 25,800 471,600 21,000 450,600 $ $ $

3 $ $ Mason Company Income statement Sales Less: cost of Goods sold Gross Margin Selling and administrative Expenses: Selling Expenses Administrative Expenses Total Selling and Administrative Expenses Net Income 651,000 450,600 200,400 $ $ 104,000 $ 48,000 $ 152,000 48,400 $ Working Notes: Overapplied manufacturing Overhead = $221,000-$200,000 = $21,000