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 Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 219,000 $ 269,000 2 $ 158,000 $ 371,000 $ 354,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year $ 56,000 2 $ 34,000 End of Year $ 35,000 $ 33,000 2 The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $663,000; and the net operating income was $34,000. 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 Revenue		$ 1,057,000
Cost of Goods Sold		$     646,000
Gross Profit		$     411,000
Operating Expenses
Selling Expenses	$        219,000
Administrative Expenses	$        158,000
Total Operating Expenses		$     377,000
Net Income (Loss)		$       34,000

Schedule of Cost of Goods Sold
Finished Goods Inventory, Beginning		$       34,000
Add: Cost of Goods Manufactured		$     706,000
Cost of Goods Available for sale		$     740,000
Deduct : Finished Goods Inventory, Ending		$       77,000
Unadjusted Cost of goods sold		$     663,000
Overapplied Overhead		$      (17,000)
Adjusted Cost of goods sold		$     646,000

Schedule of Cost of Goods manufactured
Direct Materials
Raw Material, Beginning Inventory	$          56,000
Add: Purchases	$        269,000
Total Raw Material Available	$        325,000
Deduct : Raw Material in inventory, ending	$          35,000
Raw Material used in production		$     290,000
Direct Labor		$       14,000
Manufacturing Overhead Applied		$     371,000
Total Manufacturing Costs incurred in March		$     675,000
Add : Beginning Work in Process Inventory		$       64,000
Total Manufacturing Costs		$     739,000
Deduct: Ending Work in Process Inventory		$       33,000
Cost of Goods Manufactured		$     706,000

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