Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as...

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 $ 267,000
Direct labor ?
Administrative expenses $ 158,000
Manufacturing overhead applied to work in process $ 370,000
Actual manufacturing overhead cost $ 354,000

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

Beginning of Year End of Year
Raw materials $ 53,000 $ 31,000
Work in process ? $ 25,000
Finished goods $ 34,000 ?

The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $725,000; 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.)

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Answer-

SUPERIOR COMPANY
COST OF GOODS MANUFACTURED REPORT
PARTICULARS AMOUNT
$
Beginning Raw Materials Inventory 53000
Add- Raw Material Purchases 267000
Total raw materials available 320000
Less-Ending Raw Material Inventory 31000
Raw Materials Used in production 289000
Direct Labor 16000
Manufacturing Overhead applied to work in process 370000
Total current manufacturing costs 675000
Add- Beginning Work in Process Inventory 41000
Total work in process 716000
Less- Ending Work in Process Inventory 25000
Cost of goods manufactured 691000
SUPERIOR COMPANY
COST OF GOODS SOLD
PARTICULARS Amount
$
Beginning finished goods inventory 34000
Add: Cost of goods manufactured 691000
Cost of goods available for sale 725000
Less: Ending finished goods inventory 61000
Unadjusted Cost of goods sold 664000
Less- Over applied overhead ($370000-$354000) 16000
Adjusted Cost of goods sold 648000
SUPERIOR COMPANY
INCOME STATEMENT
PARTICULARS AMOUNT AMOUNT
$ $
Sales 1053000
Less-Cost of goods sold 648000
Gross margin 405000
Less- Selling & administrative expenses 370000
Selling expenses 212000
Administrative expenses 158000
Net Operating income 35000
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