Question

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

Sales	$	653,000
Direct labor cost	$	89,000
Raw material purchases	$	137,000
Selling expenses	$	106,000
Administrative expenses	$	40,000
Manufacturing overhead applied to work in process	$	202,000
Actual manufacturing overhead costs	$	222,000

Inventories	Beginning		Ending
Raw materials	$	8,300	$	10,500
Work in process	$	5,600	$	20,500
Finished goods	$	73,000	$	25,800

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

Schedule of Cost of goods manufactured:
Beginning Inventory of WIP				5600
Current cost of Manufacture:
Beginning Inventory of RM		8300
Add: Purchase			137000
Total RM available for use		145300
Less: Ending RM inventory		10500
Direct material used				134800
Direct labour				89000
Manufacturing overheads applied		202000
Total Manufacturng cost				425800
Total cost of WIP inventory				431400
Less: Ending WIP inventory				20500
Cost of goods manufactured				410900
Schedule of Cost of goods sold
Beginning balance of FG			73000
Add: Cost of goods manufactured		410900
Total cost of goods available for sale		483900
Less: Ending balance of Fg			25800
Cost of goods sold-Unadjusted			458100
Add: Under-applied overheads (222000-202000)	20000
Adjusted cost of goods sold			478100
Income Statement
Sales revenue		653000
Less: Adjusted COGS		478100
Gross profit		174900
Less: Operating expense
Selling expense		106000
Admin expense		40000
Net Income		28900