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	$	217,000
Purchases of raw materials	$	264,000
Direct labor		?
Administrative expenses	$	154,000
Manufacturing overhead applied to work in process	$	371,000
Actual manufacturing overhead cost	$	360,000

Inventory balances at the beginning and end of the year were as follows:

	Beginning of Year			End of Year
Raw materials	$	55,000		$	34,000
Work in process		?		$	25,000
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 $661,000; and the net operating income was $36,000. The company’s underapplied or overapplied overhead is closed to Cost of Goods Sold.

1) Prepare a schedule of cost of goods manufactured.

Answer 1

• Schedule of Cost of goods manufactured

Direct materials:
Beginning raw material inventory	55,000
Add: Purchases of raw material	264,000
Total raw materials available	319,000
Less: Ending raw materials inventory	- 34,000
Raw materials used in production	285,000
Direct labor	24,000
Manufacturing overhead applied to work in process	371,000
Total manufacturing cost	680,000
Add: Beginning work in process inventory	42,000
	722,000
Less: Ending work in process inventory	- 25,000
Cost of goods manufactured	697,000

• Schedule of cost of goods sold

Beginning finished goods inventory	38,000
Add: Cost of goods manufactured	697,000
Cost of goods available for sale	735,000
Less: Ending finished goods inventory	- 74,000
Unadjusted cost of goods sold	661,000
Less: over applied overhead	- 11,000
Adjusted cost of goods sold	650,000

Income statement

Sales	1,057,000
Cost of goods sold	- 650,000
Gross margin	407,000
Selling and administrative expenses:
Selling expenses	- 217,000
Administrative expenses	- 154,000
Net operating income	36,000

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