Question

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

Sales	$	652,000
Direct labor cost	$	87,000
Raw material purchases	$	135,000
Selling expenses	$	107,000
Administrative expenses	$	44,000
Manufacturing overhead applied to work in process	$	210,000
Actual manufacturing overhead costs	$	229,000

   

Inventories	Beginning of Year		End of Year
Raw materials	$	8,700	$	10,400
Work in process	$	5,200	$	20,900
Finished goods	$	78,000	$	25,600

   

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

1.

Manufacturing overhead applied = $210,000

Actual manufacturing overhead costs = $229,000

Under applied manufacturing overhead = Actual manufacturing overhead costs- Manufacturing overhead applied

= 229,000-210,000

= $19,000

Mason Company
Cost of Goods Manufactured Schedule
Direct materials:
Raw materials inventory beginning	8,700
Add: Material purchased	135,000
Total raw materials available	143,700
Less: Raw materials inventory ending	-10,400
Raw material used in production		133,300
Direct labor		87,000
Manufacturing Overheads		210,000
Total Manufacturing Costs		430,300
Add: Work in process inventory, beginning		5,200
Total cost of work in process		435,500
Less: Work in process inventory ending		-20,900
Cost of goods manufactured		$414,600

2.

Mason Company
Schedule of Cost of Goods Sold
Finished goods inventory, beginning	78,000
Cost of goods manufactured	414,600
Cost of goods available for sale	492,600
Finished goods inventory, Ending	-25,600
Unadjusted Cost of goods sold	467,000
Under applied manufacturing overhead	19,000
Adjusted Cost of goods sold	$486,000

3.

Mason Company
Income Statement
Sales		652,000
Less: Cost of goods sold		-486,000
Gross profit		166,000
Selling and administrative expenses:
Selling expenses	107,000
Administrative expenses	44,000
Total selling and administrative expenses		-151,000
Net income		$15,000