Question

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

Sales $ 651,000 Direct labor cost $ 83,000 Raw material purchases $ 139,000 Selling expenses $ 104,000 Administrative expenses $ 43,000 Manufacturing overhead applied to work in process $ 208,000 Actual manufacturing overhead costs $ 228,000

Inventories Beginning Ending

Raw materials $ 8,500 $ 10,900

Work in process $ 5,800 $ 20,000

Finished goods $ 71,000 $ 25,600

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

1) Schedule of Cost of goods manufactured

Direct material
Beginning raw material	8500
Raw material purchase	139000
Less: Ending raw material	-10900
Direct material used		136600
direct labor		83000
Applied overhead		208000
Total manufacturing cost		427600
Beginning work in process		5800
Total Cost of work in process		433400
Less: Ending work in process		-20000
Cost of goods manufactured		413400

Schedule of Cost of goods sold

Beginning finished goods	71000
Cost of goods manufactured	413400
Cost of goods available for sale	484400
Less: Ending finished goods	-25600
Unadjusted cost of goods sold	458800
Under applied overhead	20000
Adjusted Cost of goods sold	478800

Income statement

Sales revenue		651000
Cost of goods sold		478800
Gross profit		172200
Selling expense	104000
Administrative expense	43000
Total Selling and administrative expense		147000
Operating income		25200