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 $ 213,000 Purchases of raw materials $ 268,000 Direct labor ? Administrative expenses $ 151,000 Manufacturing overhead applied to work in process $ 371,000 Actual manufacturing overhead cost $ 356,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 55,000 $ 35,000 Work in process ? $ 23,000 Finished goods $ 35,000 ? The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $669,000; and the net operating income was $34,000. 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

Solution:

Superior Company
Schedule of Cost of goods manufactured
For the year ended Dec 31
Particulars		Amount
Direct material consumed:
Beginning material inventory	$55,000.00
Add: Purchases	$268,000.00
Less: Ending material inventory	$35,000.00
Direct material used		$288,000.00
Direct labor		$16,000.00
Factory Overhead		$371,000.00
Total manufacturing costs incurred in december		$675,000.00
Add: Beginning WIP		$48,000.00
Total manufacturing costs		$723,000.00
Less: Ending WIP		$23,000.00
Cost of goods manufactured		$700,000.00

Superior Company
Cost of goods sold
For the year ended Dec 31
Particulars	Amount
Beginning finished goods inventory	$35,000.00
Add: Cost of goods manufactured	$700,000.00
Cost of goods available for sale	$735,000.00
Less: ending finishesd goods inventory	$66,000.00
Unadjusted Cost of goods sold	$669,000.00
Less: Overapplied overhead	$15,000.00
Adjusted cost of goods sold	$654,000.00

Superior Company
Income Statement
For the year ended Dec 31
Sales	$1,052,000.00
Cost of goods sold	$654,000.00
Gross Profit	$398,000.00
Selling expenses	$213,000.00
Administrative expenses	$151,000.00
Net Operating income	$34,000.00