Question

The following data from the just completed year are taken from the accounting records of Mason Company Direct labor cost Raw material purchases Selling expenses Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead costs $524,000 $ 70,000 $118,000 $140,000 $ 63,000 $ 90,000 $ 80,000 Inventories Raw materials Work in process Finished goods Beginning Ending $ 7,000 $ 15,000 $ 10,000 $ 5,000 $ 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

Solution

Mason company
Schedule of Cost of Goods Manufactured
Direct Material
Raw material Inventory Beginning	$ 7,000
Raw material Purchased	$ 118,000
Raw material available for use	$ 125,000
Less: Raw material Inventory Ending	$ 15,000
Direct Material Used		$ 110,000
Direct labor		$ 70,000
Total Manufacturing overheads Applied		$ 90,000
Total manufacturing Cost During the month		$ 270,000
Add: Work in process Beginning		$ 10,000
Total Work in Process		$ 280,000
Less: Work in progress Ending		$ 5,000
Cost of Goods Manufactured		$ 275,000

.

Mason company
Schedule of cost of goods sold
Beginning Finished Goods Inventory		$ 20,000
Add: Cost of goods manufactured		$ 275,000
Goods Available for sale		$ 295,000
Less :Ending Finished goods Inventory		$ 35,000
Unadjusted Cost of Goods Sold		$ 260,000
Overapplied Manufacturing overheads		-$ 10,000
Adjusted cost of goods sold		$ 250,000

.

Mason company
Income statement
Sales revenue		$ 524,000
Less: Cost of goods sold		$ 250,000
Gross profit		$ 274,000
Selling and administrative expenses
Selling expenses	$ 140,000
Administrative expenses'	$ 63,000	$ 203,000
Net income		$ 71,000