Question

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

Sales $ 656,000

Direct labor cost $ 82,000

Raw material

Purchases $ 139,000

Selling expenses $ 108,000

Administrative expenses $ 49,000

Manufacturing overhead applied to work in process $ 202,000 Actual manufacturing overhead costs $ 229,000

Inventories Beginning Ending Raw materials $ 8,600 $ 10,600

Work in process $ 5,400 $ 20,900 Finished goods $ 79,000 $ 25,500

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

1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.

Beginning raw material	8600
Raw material purchase	139000
Raw material available for use	147600
Less: Ending raw material	-10600
Direct material used		137000
Direct labour		82000
Manufacturing overhead applied		202000
Total manufacturing cost		421000
Beginning work in process		5400
Total cost of work in process		426400
Less: Ending work in process		-20900
Cost of goods manufactured		405500

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

Beginning finished goods	79000
Cost of goods manufactured	405500
Cost of goods available for sale	484500
Less: Ending finished goods	-25500
Unadjusted cost of goods sold	459000
Add: Underapplied overhead (229000-202000)	27000
Adjusted cost of goods sold	486000

3. Prepare an income statement.

Sales	656000
Less: Cost of goods sold	-486000
Gross profit	170000
Selling expenses	-108000
Administrative expenses	-49000
Operating income	13000