Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ 216,000 $ 270,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 157,000 $ 370,000 $ 359,000 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 $ 33,000 ? $ 25,000 $ 31,000 ? The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $663,000; 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.)

PLEASE SHOW ALL STEPS AND HOW TO SOLVE..

Answer 1

SUPERIOR COMPANY Schedule of Cost of Goods Manufactured Direct Materials: Beginning raw materials inventory 55,000 Add: Purchases of raw materials $ 270,000 Total raw materials available $ 325,000 Less: Ending raw materials inventory $ 33,000 Raw materials used in production Direct Labor Manufacturing Overhead applied to work in proces Total manufacturing costs Add: Beginning work in process inventory 292,000 13,000 370,000 675,000 59,000 734,000 25,000 709,000 Less: Ending work in process inventory Cost of Goods manufactured $ SUPERIOR COMPANY Schedule of Cost of Goods Sold Beginning finished goods inventory Add: Cost of Goods manufactured $ Cost of goods available for sale Less: Ending finished goods inventory Unadjusted cost of goods sold Less: Overapplied overhead Adjusted cost of goods sold 31,000 709,000 740,000 77,000 $ $ $ 663,000 11,000 652,000

$ $ SUPERIOR COMPANY Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses 1,062,000 652,000 410,000 $ $ 216,000 157,000 $ $ 373,000 37,000 Net Operating Income

Manufacturing costs = Raw materials used + Direct labor + Manufacturing overhead applied
$675,000 = $292,000 + Direct labor + $370,000
Direct labor = $13,000

Cost of goods available for sale = Beginning finished goods inventory + Cost of goods manufactured
$740,000 = $31,000 + Cost of goods manufactured
Cost of goods manufactured = $709,000

Cost of goods manufactured = Beginning work in process + Manufacturing costs - Ending work in process
$709,000 = Beginning work in process + $675,000 - $25,000
Beginning work in process = $59,000

Unadjusted cost of goods sold = Cost of goods available for sale - Ending finished goods inventory
$663,000 = $740,000 - Ending finished goods inventory
Ending finished goods inventory = $77,000

Overapplied overhead = Manufacturing overhead applied - Actual manufacturing overhead
Overapplied overhead = $370,000 - $359,000
Overapplied overhead = $11,000

Net operating income = Gross margin - Selling expenses - Administrative expenses
$37,000 = Gross margin - $216,000 - $157,000
Gross margin = $410,000

Gross Margin = Sales - Cost of Goods Sold
$410,000 = Sales - $652,000
Sales = $1,062,000