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 $ 262,000 Direct labor ? Administrative expenses $ 153,000 Manufacturing overhead applied to work in process $ 368,000 Actual manufacturing overhead cost $ 354,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 58,000 $ 36,000 Work in process ? $ 23,000 Finished goods $ 38,000 ? The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $662,000; and the net operating income was $35,000. 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:

Schedule of cost of goods manufactured - Superior company
Particulars		Amount
Direct materials ($58,000 + $262,000 - $36,000)		$284,000.00
Direct labor (Bal fig)		$28,000.00
Manufacturing overhead Applied		$368,000.00
Manufacturing cost incurred during period		$680,000.00
Add: Beginning WIP (Bal Fig)		$40,000.00
Less: Ending WIP		$23,000.00
Cost of goods manufactured		$697,000.00

Schedule of cost of goods sold - Superior Company
Particulars	Amount
Beginning finished goods inventory	$38,000.00
Add: Cost of goods manufactured (Bal fig)	$697,000.00
Cost of goods available for sale	$735,000.00
Less: Ending finished goods inventory (Bal Fig)	$73,000.00
Unadjusted Cost of goods sold	$662,000.00
Less: Overapplied overhead (368,000 - $354,000)	$14,000.00
Adjusted cost of goods sold	$648,000.00

Income Statement - Superior company
Particulars		Amount
Sales Revenue (Bal Fig)		$1,049,000.00
Cost of goods sold		$648,000.00
Gross Profit (Bal fig)		$401,000.00
Selling and administrative expenses:
Selling Expenses	$213,000.00
Administrative expenses	$153,000.00
Total Selling and administrative expenses		$366,000.00
Net Operating Income		$35,000.00