Question

Problem 3-13 Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement [LO3-3]

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

Selling expenses	$	211,000
Purchases of raw materials	$	267,000
Direct labor		?
Administrative expenses	$	156,000
Manufacturing overhead applied to work in process	$	365,000
Actual manufacturing overhead cost	$	353,000

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

	Beginning of Year			End of Year
Raw materials	$	55,000		$	37,000
Work in process		?		$	32,000
Finished goods	$	36,000			?

The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $665,000; 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

Income Statement
Sales (bal fig)		1057000
Cost of goods sold		653000
Gross Margin		404000
Selling and Admin Expense
Selling Expense	211,000
Administrative expense	156,000
		367000
Net Operating Income		37000

Superior Company Schedule of Cost of Goods Manufactured For the Year Ended December 31
		Direct materials:
		Raw materials inventory, beginning (given)	55,000
Add: Purchases of raw materials (given)	267,000
Raw materials available for use	322000
Deduct: Raw materials inventory, ending (given)	37,000
Raw materials used in production	285000
Direct labor	30000
Manufacturing overhead (given)	365000
Total manufacturing costs (given)	680000
Add: Work in process inventory, beginning	17000
	697000
Deduct: Work in process inventory, ending (given)	32000
Cost of goods manufactured	665000

Cost of goods sold Schedule
Finished goods inventory, beginning (given)	36000
Add: Cost of goods manufactured	665000
Goods available for sale (given)	701000
Deduct: Finished goods inventory, ending	36000
Cost of goods sold (given)	665000
Less Overhead over applied	12000
Adjusted cost of goods sold	653000