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 $ 210,000

Purchases of raw materials $ 265,000

Direct labor ? Administrative expenses $ 155,000

Manufacturing overhead applied to work in process $ 371,000

Actual manufacturing overhead cost $ 356,000

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

	Beginning of Year	End of Year
Raw Materials	54,000	36,000
Work in Process		31,000
Finished Goods	39,000

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 $666,000; and the net operating income was $36,000. 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

Raw material consumed:
Beginning Inventory of RM			54000
Add: Purchases			265000
Material available for use			319000
Less: Ending Inventory of RM			36000
Raw material consumed:			283000
Direct Labor cost:
Total Manufacturing Cost			680000
Less: Material consumed			283000
Less: Mmanufacturing OH applied			371000
Direct Labor cost:			26000
Beginning WIP inventory:
Cost of Goods available for sale			720000
Less: Beginning Inventory of FG			39000
Costt of Goods manufactured			681000
Add: Ending Inventory of WIP			31000
			712000
Less: TotaL manufacturing Cost			680000
Beginning Inventory of WIP			32000
Under/Over-applied OH:
Manufacturing OH incurred			356000
Manufacturing OH applied			371000
OH over-applied			15000
Sales Revenue:;
Cost of goods sold unadjusted			666000
Less: Over-applied OH			15000
Cost of Goods sold Adjusted			651000
Add: Selling expense			210000
Add: Admin Expense			155000
Total cost			1016000
Add: Operating profits			36000
Sales Revenue:;			1052000
Schedule of Cost of Goods manufactured:
Beginning Inventory of WIP					32000
Current cost incurred:
Beginning Inventory of RM			54000
Add: Purchases			265000
Material available for use			319000
Less: ending Inventory of RM			36000
Material used				283000
Direct labor				26000
Manufacturing OH applied				371000
Total Current cost of Manufacturing					680000
Total cost of Goods manufacturing					712000
Less: Ending Inventory of Wip					31000
Cost of Goods manufactured					681000
Schedule of Costt of Goods sold:
Beginning inventory of FG					39000
Add: Cost of Goods manufactured					681000
Cost of Goods available for sale					720000
Less: Ending Inventory of FG (720000-666000)					54000
Unadjusted COGS					666000
Less: Over-applied OH					15000
Adjusted COGS					651000
Income Statement:
Sales revenue				1052000
Less: Adjusted COGS				651000
Gross Margin				401000
Less: Selling expense				210000
Less: Admin expense				155000
Operating Profits				36000