Question

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

Sales	$	653,000
Direct labor cost	$	87,000
Raw material purchases	$	132,000
Selling expenses	$	102,000
Administrative expenses	$	48,000
Manufacturing overhead applied to work in process	$	204,000
Actual manufacturing overhead costs	$	229,000

Inventories	Beginning		Ending
Raw materials	$	8,700	$	11,000
Work in process	$	5,200	$	20,800
Finished goods	$	71,000	$	25,500

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

1.

Schedule Cost of Goods Manufactured
Beginning raw materials inventory	$8,700
Add: Raw material purchases	132,000
Less: Indirect materials	-
Less: Ending raw materials inventory	(11,000)
Direct Materials Used	$129,700
Direct Labor	87,000
Manufacturing OH applied	204,000
Total current manufacturing costs	$420,700
Add: Beginning WIP Inventory	5,200
Less: Ending WIP Inventory	(20,800)
Cost of Goods Manufactured	$405,100

2.

Schedule of cost of goods sold
Beginning FG Inventory	$71,000
Add: Cost of Goods Manufactured	405,100
Cost of Goods available	$476,100
Less: Ending FG Inventory	(25,500)
Unadjusted COGS	$450,600
Add: Underapplied MOH/Less: Overapplied MOH ($229,000 - $204,000)	25,000
Adjusted COGS	$475,600

3.

Income Statement
Sales Revenue	$653,000
COGS	475,600
Gross Profit	$177,400
Selling Expenses	102,000
Administrative Expenses	48,000
Net income	$27,400