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	$	212,000
Purchases of raw materials	$	263,000
Direct labor		?
Administrative expenses	$	153,000
Manufacturing overhead applied to work in process	$	374,000
Actual manufacturing overhead cost	$	356,000

Inventory balances at the beginning and end of the year were as follows:

	Beginning of Year			End of Year
Raw materials	$	59,000		$	36,000
Work in process		?		$	24,000
Finished goods	$	31,000			?

The total manufacturing costs for the year were $690,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $664,000; and the net operating income was $35,000. 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

Answer-

SUPERIOR COMPANY
COST OF GOODS MANUFACTURED REPORT
PARTICULARS	AMOUNT
	$
Beginning Raw Materials Inventory	59000
Add- Raw Material Purchases	263000
Total raw materials available	322000
less-Ending Raw Material Inventory	36000
Raw Materials Used in production	286000
Direct Labor	30000
Manufacturing Overhead applied to work in process	374000
Total current manufacturing costs	690000
Add- Beginning Work in Process Inventory	33000
Total work in process	723000
Less- Ending Work in Process Inventory	24000
Cost of goods manufactured	699000

SUPERIOR COMPANY
COST OF GOODS SOLD
PARTICULARS		Amount
		$
Beginning finished goods inventory		31000
Add: Cost of goods manufactured		699000
Cost of goods available for sale		730000
Less: Ending finished goods inventory		66000
Unadjusted Cost of goods sold		664000
Less- Over applied overhead	($374000-$35600)	18000
Adjusted Cost of goods sold		646000

SUPERIOR COMPANY
INCOME STATEMENT
PARTICULARS	AMOUNT	AMOUNT
	$	$
Sales		1046000
Less-Cost of goods sold		646000
Gross margin		400000
Less- Selling & administrative expenses		365000
Selling expenses	212000
Administrative expenses	153000
Net Operating income		35000