Question

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

Sales	$	524,000
Direct labor cost	$	70,000
Raw material purchases	$	118,000
Selling expenses	$	140,000
Administrative expenses	$	63,000
Manufacturing overhead applied to work in process	$	90,000
Actual manufacturing overhead costs	$	80,000

Inventories	Beginning		Ending
Raw materials	$	7,000	$	15,000
Work in process	$	10,000	$	5,000
Finished goods	$	20,000	$	35,000

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

Amount $ Amount $ 7,000 1,18,000 1,25,000 (15,000) Schedule of cost of goods manufactured :: Particulars Direct materials Beginning raw materials inventory Add: Purchases of raw materials Total raw materials available Deduct: Ending raw materials inventory Raw materials used in production Direct labor Manufacturing overhead applied to work in process Total manufacturing costs Add: Beginning work in process inventory Total work in process accounted for Deduct: Ending work in process inventory Cost of goods manufactured 1,10,000 70,000 90,000 2,70,000 10,000 2,80,000 (5,000) 2,75,000 Amount $ Amount $ Schedule of cost of goods sold :- Particulars Beginning finished goods inventory Add: Cost of goods manufactured Cost of goods available for sale Deduct: Ending finished goods inventory Unadjusted cost of goods sold Deduct: Overapplied overhead (90000-80000) Adjusted cost of goods sold 20,000 2,75,000 2,95,000 (35,000) 2,60,000 (10,000) 2,50,000 Amount $ Amount $ 5,24,000 (2,50,000) 2,74,000 Income statement : Particulars Sales Revenue Less: Cost of goods sold Gross margin Selling and administrative expenses:- Selling expenses Administrative expense Total Selling and administrative expenses Net operating income 1,40,000 63,000 2,03,000 71,000