Question

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

Sales	$	656,000
Direct labor cost	$	80,000
Raw material purchases	$	137,000
Selling expenses	$	104,000
Administrative expenses	$	45,000
Manufacturing overhead applied to work in process	$	205,000
Actual manufacturing overhead costs	$	225,000

Inventories	Beginning		Ending
Raw materials	$	8,200	$	10,900
Work in process	$	5,600	$	20,600
Finished goods	$	74,000	$	25,200

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.

Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.

	Mason Company Schedule of Cost of Goods Manufactured Direct materials: Total raw materials available Raw materials used in production Total manufacturing costs Cost of goods manufactured

Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold.

	Mason Company Schedule of Cost of Goods Sold

Prepare an income statement.

	Mason Company Income Statement Selling and administrative expenses:

Answer 1

Ans. 1	MASON COMPANY
	Schedule of Cost of Goods Manufactured
	Particulars	Amount	Amount
	Direct materials:
	Beginning raw materials inventory	$8,200
	Add: Purchase of raw materials	$137,000
	Total Raw materials available	$145,200
	Less: Ending raw materials inventory	($10,900)
	Raw materials used in production		$134,300
	Direct labor		$80,000
	Manufacturing overhead applied		$205,000
	Total manufacturing costs		$419,300
	Add: Beginning Work in process inventory		$5,600
	Total cost of work in process		$424,900
	Less: Ending Work in process inventory		($20,600)
	Cost of goods manufactured		$404,300
Ans. 2	MASON COMPANY
	Schedule of Cost of Goods Sold
	Particulars	Amount
	Beginning finished goods inventory	$74,000
	Add: Cost of Goods Manufactured	$404,300
	Cost of goods available for sale	$478,300
	Less: Ending finished goods inventory	($25,200)
	Unadjusted Cost of goods sold	$453,100
	Add: Under applied overhead	$20,000
	Adjusted cost of goods sold	$473,100
	If the applied overhead is greater than the Actual overhead
	it means that the overhead is over applied.
	*Under applied overhead = Actual overhead - Applied overhead
	$225,000 - $205,000
	$20,000
Ans.	MASON COMPANY
	Income Statement
	Particulars	Amount	Amount
	Sales		$656,000
	Less: Cost of goods sold		$473,100
	Gross margin		$182,900
	Less: Operating expenses:
	Selling expenses	$104,000
	Administrative expenses	$45,000
	Total operating expenses		$149,000
	Net Income		$33,900