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	$	210,000
Purchases of raw materials	$	265,000
Direct labor		?
Administrative expenses	$	150,000
Manufacturing overhead applied to work in process	$	373,000
Actual manufacturing overhead cost	$	360,000

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

	Beginning of Year			End of Year
Raw materials	$	50,000		$	31,000
Work in process		?		$	31,000
Finished goods	$	31,000			?
The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $662,000; and the net operating income was $40,000. 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

Schedule of Cost of Goods Manufactured
Direct Materials:
Raw Materials inventory,beginning					50,000
Add:purchases of raw materials					265,000
total raw materials available					315,000
Deduct:Raw materials inventory ,ending					31,000
Raw Materials used in production						284,000
Direct Labor						23,000
Manufacturing overhead Applied to WIP						373,000
total manufacturing costs						680,000
Add:Beginning work in process inventory						60,000
						740,000
Deduct:Ending work in process inventory						31,000
Cost of goods manufactured						709,000
Schedule of Cost of Goods sold
Finished goods inventory,beginning						31,000
Add:Cost of goods manuactured						709,000
Cost of goods available for sale						740,000
Deduct:Finished goods inventory,ending						78,000
Unadjusted cost of goods sold						662,000
less::overapplied overhead						13000
Adjusted cost of goods sold						649,000
Income statement
Sales						1,049,000
cost of good sold						649,000
Gross margin						400,000
Selling and administrative expense
Selling expenses					210,000
Administrative expense					150,000	360,000
Net operating income						40,000