Question

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

Sales	$	524,000
Direct labor cost	$	70,000
Raw material purchases	$	118,000
Selling expenses	$	140,000
Administrative expenses	$	63,000
Manufacturing overhead applied to work in process	$	90,000
Actual manufacturing overhead costs	$	80,000

Inventories	Beginning		Ending
Raw materials	$	7,000	$	15,000
Work in process	$	10,000	$	5,000
Finished goods	$	20,000	$	35,000

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.

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

Sales	$	524,000
Direct labor cost	$	70,000
Raw material purchases	$	118,000
Selling expenses	$	140,000
Administrative expenses	$	63,000
Manufacturing overhead applied to work in process	$	90,000
Actual manufacturing overhead costs	$	80,000

Inventories	Beginning		Ending
Raw materials	$	7,000	$	15,000
Work in process	$	10,000	$	5,000
Finished goods	$	20,000	$	35,000

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.

Answer 1

Part 1

Schedule of Cost of Goods Manufactured

Beginning raw materials inventory................. $ 7,000

Add: Raw material Purchases........................ 118,000

Less: Indirect materials...................................... 0

Less: Ending raw materials inventory.................(15,000)

Direct Materials Used............................................110,000

Add:Direct Labor........................................... ....... 70,000

Add: Manufacturing OH applied........... .......... ..... 90,000

Total current manufacturing costs........................ 270,000

Add: Beginning WIP Inventory.............................. 10,000

Less: Ending WIP Inventory................................... (5,000)

Cost of Goods Manufactured............................. $ 275,000

Part 2. schedule of cost of goods sold

Beginning Finished goods Inventory................... 20,000

Add: Cost of Goods Manufactured..................... 275,000

Cost of Goods available...................................... 295,000

Less: Ending Finished goods inventory............. (35,000)

Unadjusted cost of goods sold............ ....... ..... 260,000

Less: Overapplied Manufacturing overhead...... (10,000)

Adjusted Cost of goods sold.................................. 250,000

Overapplied Manufacturing overhead = Actual manufacturing overhead costs - Manufacturing overhead applied to work in process = 80000-90000

Part 3 Income Statement

Mason Company

Income statement

Sales Revenue....................... ........ ........ $ 524,000

Less: cost of goods sold........................... 250,000

Gross Profit................................................. 274,000

Less: Selling Expenses............................... 140,000

Less: Administrative Expenses.................... 63,000

Net income....................................................$ 71,000

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