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 $ 659,000 $ 88,000 $ 135,000 $ 102,000 $ 40,000 $ 222,000 $ 205,000 Inventories Raw materials Work in process Finished goods Beginning $ 8,800 $ 5,200 $ 79,000 Ending $ 10,500 $ 20,800 $ 25,400 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.

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Answer 1

1.

Schedule of cost of goods manufactured

Work in process, beginning			$5,200
Direct materials
Raw materials beginning	$8,800
Raw materials Purchased	$135,000
Raw materials available for use	$143,800
Less: Raw materials Ending	($10,500)
Direct materials used in production		$133,300
Direct labor		$88,000
Manufacturing overhead		$222,000
Total Manufacturing costs added to production			$443,300
Total manufacturing costs to account for			$448,500
Less: Work in process, Ending			($20,800)
Cost of goods manufactured			$427,700

Schedule of cost of goods sold

Beginning finished goods inventory	$79,000
Add: Cost of goods manufactured	$427,700
Cost of goods available for sale	$506,700
Less: Finished goods Inventory, Ending	($25,400)
Unadjusted cost of goods sold	$481,300
Less: Overapplied overhead	($17,000)
Adjusted cost of goods sold	$464,300

Income statement

Sales	$659,000
Less: Cost of goods sold	($464,300)
Gross margin	$194,700
Less: Expenses
Selling expenses	$102,000
Administrative expenses	$40,000
Total expenses	($142,000)
Net income	$52,700