Question

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

Sales	$	660,000
Direct labor cost	$	88,000
Raw material purchases	$	136,000
Selling expenses	$	104,000
Administrative expenses	$	48,000
Manufacturing overhead applied to work in process	$	204,000
Actual manufacturing overhead costs	$	221,000

   

Inventories	Beginning of Year		End of Year
Raw materials	$	8,900	$	10,800
Work in process	$	5,300	$	20,300
Finished goods	$	76,000	$	25,100

   

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.

          

3.	Prepare an income statement.

      

Answer 1

Mason Company
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	$8,900
Add: Purchases of raw materials	136,000
Raw materials available for use	144,900
Less: Ending raw materials inventory	10,800
Raw materials used in production		$134,100
Direct labor		88,000
Manufacturing overhead		204,000
Total manufacturing costs		426,100
Add: Beginning work in process inventory		5,300
		431,400
Less: Ending work in process inventory		20,300
Cost of goods manufactured		$411,100

2.Prepare a schedule of cost of goods sold.

Mason Company
Schedule of Cost of Goods Sold
Beginning finished goods inventory	$76,000
Add: Cost of goods manufactured	411,100
Goods available for sale	487,100
Less: Ending finished goods inventory	25,100
Unadjusted cost of goods sold	462,000
Add: Underapplied overhead	17,000
Adjusted cost of goods sold	$479,000

3.Prepare an income statement.

Mason Company
Income Statement
Sales		$660,000
Cost of goods sold		$479,000
Gross margin		181,000
Selling and administrative expenses:
Selling expenses	104,000
Administrative expense	48,000
		152,000
Net operating income		$333,000