Question

Problem 3-13 Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement [LO3-3]

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials):

Selling expenses	$	216,000
Purchases of raw materials	$	269,000
Direct labor		?
Administrative expenses	$	158,000
Manufacturing overhead applied to work in process	$	370,000
Actual manufacturing overhead cost	$	356,000

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

	Beginning of Year			End of Year
Raw materials	$	53,000		$	33,000
Work in process		?		$	30,000
Finished goods	$	34,000			?

The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $725,000; the unadjusted cost of goods sold totaled $662,000; and the net operating income was $37,000. 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

1) Income statement

Sales	1059000
Less: Cost of goods sold (662000-14000)	648000
Gross profit	411000
Less: Operating expense
Selling expense	216000
Administrative expenses	158000
Total operating expense	374000
Net income	37000

Schedule Cost of goods sold

Beginning finished goods	34000
Cost of goods manufactured	691000
Cost of goods available for sale	725000
Less: Ending finished goods	63000
Unadjusted cost of goods sold	662000
Less: Over applied overhead	-14000
Adjusted cost of goods sold	648000

Schedule of cost of goods manufactured

Direct material used
Beginning direct material	53000
Purchase of direct material	269000
Direct material available	322000
Less: Ending material	-33000
Direct material used		289000
Direct labor		16000
Manufacturing overhead applied		370000
Total manufacturing cost		675000
Beginning WIP		46000
Total Cost of WIP		721000
Less: Ending WIP		30000
Cost of goods manufactured		691000