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	$	212,000
Purchases of raw materials	$	268,000
Direct labor		?
Administrative expenses	$	158,000
Manufacturing overhead applied to work in process	$	366,000
Actual manufacturing overhead cost	$	351,000

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

	Beginning of Year			End of Year
Raw materials	$	58,000		$	32,000
Work in process		?		$	31,000
Finished goods	$	34,000			?

The total manufacturing costs for the year were $690,000; the cost of goods available for sale totaled $750,000; the unadjusted cost of goods sold totaled $661,000; and the net operating income was $32,000. 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		1048000
Cost of goods sold (661000-15000)		646000
Gross profit		402000
Selling and administrative expense
Selling expense	212000
Administrative expense	158000
Total Selling and administrative expense		370000
Operating income		32000

Schedule cost of goods sold

Beginning finished goods	34000
Cost of goods manufactured	716000
Cost of goods available for sale	750000
Ending finished goods	89000
Unadjusted cost of goods sold	661000

Schedule of cost of goods manufactured

Direct material
Beginning direct material	58000
Purchase of raw material	268000
Raw material available for sale	326000
Less: Ending raw material	-32000
Direct material used		294000
Direct labor		30000
Manufacturing overhead applied		366000
Total manufacturing cost		690000
Beginning work in process		57000
Total work in process		747000
Ending work in process		31000
Cost of goods manufactured		716000