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 $ 213,000 $ 266,000 $156,000 $ 364,000 $ 351,000 Inventory balances at the beginning and end of the year were as follows Beginning of Year End of Year Raw materials Work in process Finished goods $ 58,000 32,000 228,000 $ 36,000 The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $664,000; 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

a) Prepare an income statement for the year.

Sales	1054000
Less: cost of goods sold (664000-13000)	(651000)
Gross profit	403000
Less: Operating expenses
Administrative expenses	(156000)
Selling expenses	(213000)
Net operating income	34000

2. Schedule of cost of goods sold :

Beginning finished goods inventory	36000
Add: Cost of goods manufactured	709000
Cost of goods available for sale	745000
Less; Ending finished goods inventory	(81000)
Unadjusted cost of goods sold	664000
Less: Over applied overhead	(13000)
Adjusted cost of goods sold	651000

Schedule of cost of goods manufactured :

Direct material
Beginning raw material inventory	58000
Add: material purchase	266000
material available for use	324000
Less: Ending raw material inventory	(32000)
Direct material used in production		292000
Direct labour		29000
Applied manufacturing overhead		364000
Total manufacturing cost		685000
Add: Beginning work in process		52000
Total cost of work in process		737000
Less: Ending work in process		(28000)
Cost of goods manufactured		709000