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	$	214,000
Purchases of raw materials	$	264,000
Direct labor		?
Administrative expenses	$	156,000
Manufacturing overhead applied to work in process	$	368,000
Actual manufacturing overhead cost	$	354,000
Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 55,000 $ 33,000 Work in process ? $ 27,000 Finished goods $ 33,000 ? The total manufacturing costs for the year were $690,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $669,000; and the net operating income was $34,000. 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 revenue	1059000
Less: Cost of goods sold (669000-14000)	655000
Gross profit	404000
Less: Selling expense	214000
Less: Administrative expense	156000
Net operating income	34000

Schedule of cost of goods sold :

Beginning finished goods	33000
Cost of goods manufactured (735000-33000)	702000
Cost of goods available for sale	735000
Less; Ending finished goods (735000-669000)	-66000
Unadjusted cost of goods sold	669000

Schedule of cost of goods manufactured :

Beginning raw material	55000
Raw material purchase	264000
Less: Ending raw material	-33000
Direct material used		286000
Direct labour (690000-286000-368000)		36000
Overhead applied		368000
Total manufacturing cost		690000
Beginning work in process (729000-690000)		39000
Total cost of work in process		729000
Less: Ending work in process		-27000
Cost of goods manufactured		702000