Question

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

Sales	$	658,000
Direct labor cost	$	90,000
Raw material purchases	$	138,000
Selling expenses	$	107,000
Administrative expenses	$	47,000
Manufacturing overhead applied to work in process	$	209,000
Actual manufacturing overhead costs	$	223,000

Inventories	Beginning		Ending
Raw materials	$	8,500	$	10,800
Work in process	$	5,600	$	20,600
Finished goods	$	75,000	$	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.

Question 2

Jurvin Enterprises is a manufacturing company that had no beginning inventories. A subset of the transactions that it recorded during a recent month is shown below.

1. $76,000 in raw materials were purchased for cash.
2. $72,100 in raw materials were used in production. Of this amount, $65,100 was for direct materials and the remainder was for indirect materials.
3. Total labor wages of $151,400 were incurred and paid. Of this amount, $133,800 was for direct labor and the remainder was for indirect labor.
4. Additional manufacturing overhead costs of $125,200 were incurred and paid.
5. Manufacturing overhead of $129,800 was applied to production using the company’s predetermined overhead rate.
6. All of the jobs in process at the end of the month were completed.
7. All of the completed jobs were shipped to customers.
8. Any underapplied or overapplied overhead for the period was closed to Cost of Goods Sold.

Required:

1. Post the above transactions to T-accounts.
2. Determine the adjusted cost of goods sold for the period.

Answer 1

Answer: 1

1.	Cost of Goods Manufactured
	Direct materials:
	Raw materials inventory, beginning.....................................	$  8500
	Add: Purchases of raw materials..........................................	138000
	Total raw materials available................................................	146500
	Deduct: Raw materials inventory, ending............................	10800
	Raw materials used in production........................................		135700
	Direct labor.................................................................................		90,000
	Manufacturing overhead applied to work in process inventory.		209000
	Total manufacturing costs..........................................................		434700
	Add: Beginning work in process inventory...............................		5600
			440300
	Deduct: Ending work in process inventory................................		20600
	Cost of goods manufactured......................................................		$419700
2.	Cost of Goods Sold
	Finished goods inventory, beginning.........................................	$ 75000
	Add: Cost of goods manufactured.... (see above)..........	419700
	Cost of goods available for sale.................................................	494700
	Deduct: Finished goods inventory, ending................................	25,000
	Unadjusted cost of goods sold..................................................	469700
	Add: Underapplied overhead....................................................	10800
	Adjusted cost of goods sold......................................................	$480500

3.

Eccles Company Income Statement
Sales.........................................................................................		$658000
Cost of goods sold ($469700 + $10800)...............................		480500
Gross margin...................................................................................		177500
Selling and administrative expenses:

Selling expenses.................................................................	$107000
Administrative expense......................................................	47000	154000
Net operating income..............................................................		$  23500

Answer 2

Requirement 1

Cash		Raw Materials
		(a)	76000		(a)	76000	(b)	72100
		(c)	151400		Bal.	3900
		(d)	125200

Work in Process		Finished Goods
(b)	65100	(f)	328700		(f)	328700	(g)	328700
(c)	133800				Bal.	0
(e)	129800
Bal.	0

Manufacturing Overhead		Cost of Goods Sold
(b)	7000(72100-65100)	(e)	129800		(g)	328700
(c)	17600(151400-133800)	(h)	20000		(h)	20000
(d)	125200				Bal.	348700
Bal.	0

Requirement 2:

The adjusted cost of goods sold is shown above as the ending balance in the Cost of Goods Sold T-account ($348700).