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	$	151,000
Manufacturing overhead applied to work in process	$	365,000
Actual manufacturing overhead cost	$	354,000

Inventory balances at the beginning and end of the year were as follows:

	Beginning of Year			End of Year
Raw materials	$	50,000		$	34,000
Work in process		?		$	26,000
Finished goods	$	32,000			?

The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $750,000; the unadjusted cost of goods sold totaled $664,000; and the net operating income was $38,000. 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

	Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning	50000
Add: Purchases of raw materials	263000
Total raw materials available	313000
Deduct: Raw materials inventory, ending	34000
Raw materials used in production		279000
Direct labor		41000
Manufacturing overhead applied to work in process inventory		365000
Total manufacturing costs		685000
Add: Beginning work in process inventory		59000
		744000
Deduct: Ending work in process inventory		26000
Cost of goods manufactured		718000
	Schedule of Cost of Goods Sold
Finished goods inventory, beginning		32000
Add: Cost of goods manufactured		718000
Cost of goods available for sale		750000
Deduct: Finished goods inventory, ending		86000
Unadjusted cost of goods sold		664000
Less: Overapplied overhead		11000
Adjusted cost of goods sold		653000
	Income Statement
Sales		1061000
Cost of goods sold		653000
Gross margin .		408000
Selling and administrative expenses:
Selling expenses	219000
Administrative expense	151000	370000
Net operating income		38000