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 $ 212,000 Purchases of raw materials $ 261,000 Direct labor ? Administrative expenses $ 157,000 Manufacturing overhead applied to work in process $ 371,000 Actual manufacturing overhead cost $ 357,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 60,000 $ 31,000 Work in process ? $ 27,000 Finished goods $ 35,000 ? The total manufacturing costs for the year were $680,000; 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

Superior Company
Schedule of Cost of Goods Manufactured
Direct materials;
Raw materials inventory, beginning	$60000
+ Purchase of raw materials	$261000
Total taw materials available	$321000
- Raw materials inventory, ending	$31000
Raw materials used in production		$290000
+ Direct labor		$19000
+ Manufacturing overhead applied to work in process inventory		$371000
Total manufacuring costs		$680000
+ Beginning WIP inventory		$62000
- Ending WIP inventory		$27000
Cost of goods manufactured		$715000

Superior Company
Schedule of Cost of Goods Sold
Finished goods inventory, beginning	$35000
+ Cost of goods manufactured	$715000
Cost of goods available for sale	$750000
- Finished goods inventory, ending	$86000
Unadjusted cost of goods sold	$664000
- Overapplied overhead	$14000
Adjusted cost of goods sold	$650000

Superior Company
Income Statement
Sales		$1057000
Less: Cost of Goods Sold		$650000
Gross profit		$407000
Less: Admistrative & Selling Expenses;
Selling expenses	$212000
Administrative expenses	$157000	$369000
Net operating income		$38000