Question

Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement

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

Sales ..........................................

$524,000

Direct labor cost..................................

$70,000

Raw material purchases............................

$118,000

Selling expenses .................................

$140,000

Administrative expenses ...........................

$63,000

Manufacturing overhead applied to work in process ......

$90,000

Actual manufacturing overhead costs .................

$80,000

Inventories

Beginning of

End of

Year

Year

Raw materials..............

$7,000

$15,000

Work in process............

$10,000

$5,000

Finished goods.............

$20,000

$35,000

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.

3. Prepare an income statement.

Answer 1

1.

Schedule of Cost of Goods Manufactured
Beginning raw materials inventory	$7,000
Add: Raw material purchases	$118,000
Less: Indirect materials	-
Less: Ending raw materials inventory	($15,000)
Direct Materials used	$110,000
Direct labor	$70,000
Manufacturing overhead applied	$90,000
Total current manufacturing costs	$270,000
Add: Beginning WIP inventory	$10,000
Less: Ending WIP inventory	($5,000)
Cost of Goods Manufactured	$275,000

2.

Schedule of Cost of Goods Sold
Beginning Finished goods inventory	$20,000
Add: Cost of goods manufactured	$275,000
Cost of goods available	$295,000
Less: Ending finished goods inventory	($35,000)
Unadjusted cost of goods sold	$260,000
Less: Overapplied manufacturing overhead (Manufacturing overhead applied - Actual manufacturing overhead)	($10,000)[$90,000 -$80,000]
Adjusted cost of goods sold	$250,000

3.

Income Statement
Sales Revenue	$524,000
Less: Cost of goods sold	$250,000
Gross profit	$274,000
Less: Selling Expenses	$140,000
Less: Administrative Expenses	$63,000
Net Income	$71,000