Question

The following data from the just completed year are taken from the accounting records of Mason Company: Sales $ 657,000 Direct labor cost $ 81,000 Raw material purchases $ 132,000 Selling expenses $ 110,000 Administrative expenses $ 43,000 Manufacturing overhead applied to work in process $ 201,000 Actual manufacturing overhead costs $ 225,000 Inventories Beginning Ending Raw materials $ 8,600 $ 10,800 Work in process $ 6,000 $ 20,200 Finished goods $ 80,000 $ 25,700 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	$8,600
Add: Purchases of raw materials	132,000
Raw materials available for use	140,600
Less: Ending raw materials inventory	10,800
Raw materials used in production		$129,800
Direct labor		81,000
Manufacturing overhead		201,000
Total manufacturing costs		411,800
Add: Beginning work in process inventory		6,000
		417,800
Less: Ending work in process inventory		20,200
Cost of goods manufactured		$397,600
2
Mason Company
Schedule of Cost of Goods Sold
Beginning finished goods inventory	$80,000
Add: Cost of goods manufactured	397,600
Goods available for sale	477,600
Less: Ending finished goods inventory	25,700
Unadjusted cost of goods sold	451,900
Add: Underapplied overhead	24000
Adjusted cost of goods sold	$475,900
3
Mason Company
Income Statement
Sales		$657,000
Cost of goods sold		$475,900
Gross margin		181,100
Selling and administrative expenses:
Selling expenses	110,000
Administrative expense	43,000
		153,000
Net operating income		$28,100