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 $ 214,000 Purchases of raw materials $ 267,000 Direct labor ? Administrative expenses $ 157,000 Manufacturing overhead applied to work in process $ 371,000 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 $ 59,000 $ 33,000 Work in process ? $ 28,000 Finished goods $ 33,000 ? The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $720,000; the unadjusted cost of goods sold totaled $667,000; 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

Superior company Income Statement
Sales (650000+408000)		1058000
Cost of goods sold		650000
Gross margin		408000
Selling and administrative expenses
Selling expenses	214000
Administrative expenses	157000
		371000
Net operating income		37000

Superior company Schedule of Cost of Goods sold
Beginning finished goods inventory	33000
Add:Cost of goods manufactured (720000-33000)	687000
Cost of goods available for sale	720000
Less : Ending finished goods inventory	53000
Unadjusted cost of goods sold	667000
Less:Over applied overhead (354000-371000)	17000
Adjusted cost of goods sold	650000

Superior company Schedule of Cost of Goods manufactured
Direct material
Beginning raw material inventory	59000
Add: Purchase of rawmatterial	267000
Total Raw material available	326000
Less: Ending raw material Inventory	-33000
Raw material Used in production		293000
Direct labor (685000-293000-371000)		21000
Manufacturing overhead applied to wokinprocess		371000
Total Manufacturing costs		685000
Add: Beginning work in process inventory (712000-685000)		27000
		712000
Less: Ending work in process inventory		-25000
Cost of goods manufctured		687000