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 $ 219,000 Purchases of raw materials $ 270,000 Direct labor ? Administrative expenses $ 159,000 Manufacturing overhead applied to work in process $ 368,000 Actual manufacturing overhead cost $ 353,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 60,000 $ 33,000 Work in process ? $ 31,000 Finished goods $ 39,000 ? The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $720,000; the unadjusted cost of goods sold totaled $664,000; 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

Income statement

Sales	1,057,000
Cost of goods sold	- 650,000
Gross margin	413,000
Selling and administrative expenses:
Selling expenses	- 219,000
Administrative expenses	- 159,000
Net operating income	35,000

• Schedule of cost of goods sold

Beginning finished goods inventory	39,000
Add: Cost of goods manufactured	681,000
Cost of goods available for sale	720,000
Less: Ending finished goods inventory	- 56,000
Unadjusted cost of goods sold	664,000
Less: over applied overhead	- 15,000
Adjusted cost of goods sold	649,000

• Schedule of Cost of goods manufactured

Direct materials:
Beginning raw material inventory	60,000
Add: Purchases of raw material	270,000
Total raw materials available	330,000
Less: Ending raw materials inventory	- 33,000
Raw materials used in production	297,000
Direct labor	15,000
Manufacturing overhead applied to work in process	368,000
Total manufacturing cost	680,000
Add: Beginning work in process inventory	32,000
	712,000
Less: Ending work in process inventory	- 31,000
Cost of goods manufactured	681,000

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