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 $ 136,000 $ 100,000 $ 43,000 $ 202,000 $ 221,000 Inventories Raw materials Work in process Finished goods Beginning $ 8,100 $ 5,200 $ 71,000 Ending $ 10,800 $ 20,300 $ 25,900 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 materials:
	Raw materials inventory, beginning	8,100
	Add: Purchases of raw materials	136,000
	Total raw materials available	144,100
	Deduct: Raw materials inventory, ending	10,800
	Raw materials used in production		133,300
	Direct labor		88,000
	Manufacturing overhead applied to work in process		202,000
	Total manufacturing costs		423,300
	Add: Beginning work in process inventory		5,200
	Total cost of work in process		428,500
	Deduct: Ending work in process inventory		20,300
	Cost of goods manufactured		408,200
2	Mason Company
	Schedule of Cost of Goods Sold
	Finished goods inventory, beginning		71,000
	Add: Cost of goods manufactured		408,200
	Cost of goods available for sale		479,200
	Deduct: Finished goods inventory, ending		25,900
	Unadjusted cost of goods sold		453,300
	Underapplied (overapplied) overhead		19,000
	Adjusted cost of goods sold		472,300
3	Mason Company
	Income Statement
	Sales		659,000
	Cost of goods sold		472,300
	Gross Profit		186,700
	Selling and administrative expenses:
	Selling expense	100,000
	Administrative expense	43,000	143,000
	Net Operating Income		43,700