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 $ 218,000 Purchases of raw materials $ 264,000 Direct labor ? Administrative expenses $ 158,000 Manufacturing overhead applied to work in process $ 364,000 Actual manufacturing overhead cost $ 353,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 56,000 $ 40,000 Work in process ? $ 29,000 Finished goods $ 35,000 ? The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $720,000; the unadjusted cost of goods sold totaled $667,000; and the net operating income was $39,000. 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

Income Statement
Sales	$10,82,000.00
(-) Cost of goods sold	$6,67,000.00
Gross profit (39000+218000+158000)	$4,15,000.00
(-) Selling expenses	$(2,18,000.00)
(-) Administration expenses	$(1,59,000.00)
Net operating income	$38,000.00
Cost of Goods Sold
(+) Beginning Finished goods inventory	$35,000.00
Cost of Goods Manufactured (720000-35000)	$6,85,000.00
Total goods available for sale	$7,20,000.00
(-) Ending Finished goods inventory (720000-667000)	$53,000.00
Cost of goods sold	$6,67,000.00
(-) Manufacturing overhead under applied	$11,000.00
Adjusted cost of goods sold	$6,56,000.00
Cost of Goods Manufactured
(+) Beginning raw materials inventory	$56,000.00
cost of material purchased	$2,64,000.00
Total raw material available	$3,20,000.00
(-) Ending raw materials inventory	$(40,000.00)
Total raw materials used	$2,80,000.00
Direct labor (680000-364000-280000)	$36,000.00
Manufacturing overhead	$3,53,000.00
Total manufacturing cost	$6,69,000.00
(+) Beginning Work-in-process inventory (685000-669000+29000)	$45,000.00
	$7,14,000.00
(-) Ending work-in-process inventory	$(29,000.00)
Cost of Goods Manufactured	$6,85,000.00