Question

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

Sales	$	658,000
Direct labor cost	$	81,000
Raw material purchases	$	137,000
Selling expenses	$	101,000
Administrative expenses	$	45,000
Manufacturing overhead applied to work in process	$	207,000
Actual manufacturing overhead costs	$	230,000

Inventories	Beginning		Ending
Raw materials	$	8,100	$	10,500
Work in process	$	5,100	$	20,600
Finished goods	$	72,000	$	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

Mason Company
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	$8,100
Add: Purchases of raw materials	137,000
Raw materials available for use	145,100
Less: Ending raw materials inventory	10,500
Raw materials used in production		$134,600
Direct labor		81,000
Manufacturing overhead		207,000
Total manufacturing costs		422,600
Add: Beginning work in process inventory		5,100
		427,700
Less: Ending work in process inventory		20,600
Cost of goods manufactured		$407,100
2
Mason Company
Schedule of Cost of Goods Sold
Beginning finished goods inventory	$72,000
Add: Cost of goods manufactured	407,100
Goods available for sale	479,100
Less: Ending finished goods inventory	25,800
Unadjusted cost of goods sold	453,300
Add: Underapplied overhead	23000
Adjusted cost of goods sold	$476,300
3
Mason Company
Income Statement
Sales		$658,000
Cost of goods sold		$476,300
Gross margin		181,700
Selling and administrative expenses:
Selling expenses	101,000
Administrative expense	45,000
		146,000
Net operating income		35,700