Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ 212,000 $ 267,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 155,000 $366,000 $ 355,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year End of Year $ 55,000 $ 32,000 ? $ 25,000 $ 34,000 The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $662,000; and the net operating income was $37,000. 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

SUPERIOR COMPANY Income Statement $ 1,055,000 Sales Less: adjusted Cost of Goods Sold Gross Margin Selling and administrative Expenses Selling Expenses Administrative Expenses 651,000 404,000 212,000 155,000 367,000 Net Operative Income 37,000 SUPERIOR COMPANY Schedule Cost of goods Sold Finished goods inventory, beginning Add: Cost of Goods manufactured 34,000 706,000 Cost of goods available for sale Less: Finished goods inventory, ending 740,000 78,000 Unadjusted cost of goods sold Less: Over applied overhead Adjusted Cost of goods sold Note : 662,000 11,000 651,000 Over Applied Overhead =Manufacturing overhead applied to work in process - Actual manufacturing overhaed cost =S366,000-S355,000 = $11,000 %3D

SUPERIOR COMPANY Schedule Cost of goods Manufactured Schedule Direct Material : Raw Material inventory Beginning Add: Raw materials purchases 55,000 267,000 Raw materials available 322,000 Less: Raw materials inventory Ending 32,000 Raw Materials used in production Direct Labour Manufacturing overhead applied to work in Process Total Manufacturing Costs Add: Work in process inventory Beginning Less: work in process inventory Ending Cost of goods Manufactured 290,000 29,000 366,000 685,000 46,000 25,000 706,000