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 $ 219,000 Purchases of raw materials $ 263,000 Direct labor ? Administrative expenses $ 150,000 Manufacturing overhead applied to work in process $ 368,000 Actual manufacturing overhead cost $ 351,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 54,000 $ 34,000 Work in process ? $ 31,000 Finished goods $ 37,000 ? The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $662,000; and the net operating income was $30,000. 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

Superior Company
Income Statement
Sales ($645,000 + $399,000)		1,044,000.00
Cost of Goods Sold		645,000.00
Gross Margin ($369,000 + $30,000)		399,000.00
Selling & Administrative Expenses:
Selling Expenses	219,000.00
Administrative Expenses	150,000.00	369,000.00
Net Operating Income		30,000.00
Superior Company
Schedule of Cost of Goods Sold
Finished Goods Inventory, Beginning Balance	37,000.00
Add: Cost of Goods Manuactured - ($730,000 - $37,000)	693,000.00
Cost of Good Available for Sale	730,000.00
Less: Finished Goods Inventory, Ending Balance ($730,000 - $662,000)	(68,000.00)
Unadjusted Cost of Goods Sold	662,000.00
Less: Overapplied Overhead	(17,000.00)
Adjusted Cost of Goods Sold	645,000.00
Superior Company
Schedule of Cost of Goods Manufactured
Direct Materials:
Raw Materials, Beginning Balance	54,000.00
Add: Raw Material Purchases	263,000.00
Total Raw Material Available	317,000.00
Less: Raw Material, Ending Balance	(34,000.00)
Raw Material used in Production		283,000.00
Direct Labor - ($680,000 - ($283,000 + $368,000))		29,000.00
Manufacturing Overhead Applied		368,000.00
Total Manufacturing Costs		680,000.00
Add: Work in Process, Beginning ($730,000 - $680,000)		50,000.00
		730,000.00
Less: Work in Process, Ending		(37,000.00)
Cost of Goods Manufactured		693,000.00
Applied Manufacturing Overhead	368,000.00
Actual Manufacturing Overhead	351,000.00
Overapplied Overhead	17,000.00