Question

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

Sales	$	651,000
Direct labor cost	$	88,000
Raw material purchases	$	138,000
Selling expenses	$	103,000
Administrative expenses	$	48,000
Manufacturing overhead applied to work in process	$	206,000
Actual manufacturing overhead costs	$	228,000

Inventories	Beginning		Ending
Raw materials	$	8,500	$	10,900
Work in process	$	5,400	$	20,000
Finished goods	$	76,000	$	25,000

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. 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:
	Beginning raw materials inventory					8,500
	Add:purchase of raw materials					138,000
	Raw materials available for use					146,500
	Deduct:Ending raw materials inventory					10,900
	Raw materials used in production						135,600
	direct labor						88,000
	Manufacturing overhead						206,000
	total manufacturing costs						429,600
	Add:Beginning work in process inventory						5,400
							435,000
	Deduct :Ending work in process inventory						20,000
	Cost of goods manufactured						415,000
	Schedule of cost of goods sold
	Beginning finished goods inventory						76,000
	Add:cost of goods manufactured						415,000
	goods available for sale						491,000
	less:ending finished goods inventory						25,000
	unadjusted cost of goods sold						466,000
	Add:under applied overhead			(228,000-206,000)			22000
	Adjusted cost of goods sold						488,000
	Income statement
	Sales						651,000
	less cost of goods sold						488,000
	Gross profit						163,000
	Selling and administrative expense
	Selling expense					103,000
	Administrative expense					48,000	151,000
	Net operating income						12,000