Question

The following data from the just completed year are taken from the accounting records of Mason Company:

Sales	$	650,000
Direct labor cost	$	87,000
Raw material purchases	$	130,000
Selling expenses	$	107,000
Administrative expenses	$	48,000
Manufacturing overhead applied to work in process	$	209,000
Actual manufacturing overhead costs	$	222,000

Inventories	Beginning		Ending
Raw materials	$	8,800	$	10,100
Work in process	$	5,200	$	20,400
Finished goods	$	74,000	$	25,700

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

	Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	8800
Add: Purchases of raw materials	130000
Total raw materials available	138800
Less: Raw materials inventory, ending	10100
Raw materials used in production		128700
Direct labor		87000
Manufacturing overhead applied		209000
Total manufacturing costs		424700
Add: Beginning work in process inventory		5200
		429900
Less: Ending work in process inventory		20400
Cost of goods manufactured		409500
	Schedule of Cost of Goods Sold
Finished goods inventory, beginning	74000
Add: Cost of goods manufactured	409500
Cost of goods available for sale	483500
Less: Finished goods inventory, ending	25700
Unadjusted cost of goods sold	457800
Add: Underapplied overhead	13000	=222000-209000
Adjusted cost of goods sold	470800
	Income Statement
Sales		650000
Cost of goods sold		470800
Gross margin .		179200
Selling and administrative expenses:
Selling expenses	107000
Administrative expense	48000	155000
Net operating income		24200