Question

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

Sales	$	650,000
Direct labor cost	$	81,000
Raw material purchases	$	137,000
Selling expenses	$	101,000
Administrative expenses	$	43,000
Manufacturing overhead applied to work in process	$	202,000
Actual manufacturing overhead costs	$	225,000

Inventories	Beginning		Ending
Raw materials	$	8,400	$	10,400
Work in process	$	5,100	$	20,200
Finished goods	$	71,000	$	25,900

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 1:

Mason Company
Schedule of cost of goods manufactured
Particulars	Details	Amount
Direct Material:
Beginning inventory	$8,400.00
Raw material purchases	$137,000.00
Total Raw material available	$145,400.00
Ending inventory	$10,400.00
Raw material used in production		$135,000.00
Direct Labor		$81,000.00
Manufacturing overhead Applied		$202,000.00
Total manufacturing costs		$418,000.00
Add: Opening WIP		$5,100.00
Total cost of work in process		$423,100.00
Less: ending WIP		$20,200.00
Cost of goods manufactured		$402,900.00

Solution 2:

Mason Company
Schedule of cost of goods Sold
Particulars	Amount
Beginning finished goods inventory	$71,000.00
Add: Cost of goods manufactured	$402,900.00
Cost of goods available for sale	$473,900.00
Less: ending finished goods inventory	$25,900.00
Unadjusted cost of goods sold	$448,000.00
Add: Under-applied overhead ($225,000 - $202,000)	$23,000.00
Cost of goods sold	$425,000.00

Solution 3:

Mason Company
Income Statement
Particulars	Details	Amount
Sales		$650,000.00
Cost of goods sold		$425,000.00
Gross Profit		$225,000.00
Selling and administrative expenses:
Selling expenses	$101,000.00
Administrative Expenses	$43,000.00	$144,000.00
Net Income		$81,000.00