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	$	217,000
Purchases of raw materials	$	269,000
Direct labor		?
Administrative expenses	$	160,000
Manufacturing overhead applied to work in process	$	369,000
Actual manufacturing overhead cost	$	353,000

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

	Beginning of Year			End of Year
Raw materials	$	57,000		$	35,000
Work in process		?		$	30,000
Finished goods	$	34,000			?

The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $665,000; 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.)

rev: 1

Answer 1

Solution:

Superior Company
Income Statement
Sales ($413000+649000)	$10,62,000
Less: Cost of goods sold [$665000- ($369000-$353000)]	$6,49,000
Gross Profit ($36000+$217000+$160000)	$4,13,000
Less: Expenses:
Selling Expenses	$2,17,000
Administrative expense	$1,60,000
Net operating income	$36,000

Superior Company
Schedule of cost of goods sold
Cost of goods manufactured (745000-34000)	$7,11,000
Add: Finished Goods, Beginning	$34,000
Total goods available for sale	$7,45,000
Less: Finished Goods, Ending ($745000-$665000)	$80,000
Unadjusted Cost of goods Sold	$6,65,000
Less: Overapplied Overhead ($369000-$353000)	$16,000
Cost of goods Sold	$6,49,000

Superior Company
Schedule of cost of goods manufactured
Direct Material:
Raw Material, Beginning	$57,000
Add: Purchase of Raw Material	$2,69,000
Total Raw material available	$3,26,000
Less: Raw Material, Ending	$35,000
Raw material used in production		$2,91,000
Direct Labor cost ($675000-291000-369000)		$15,000
Applied Manufacturing Overhead		$3,69,000
Total Manufacturing Costs		$6,75,000
Add: Work in Process, Beginning ($741000-$675000)		$66,000
Subtotal ($711000+$30000)		$7,41,000
Less: Work in Process, Ending		$30,000
Cost of goods manufactured ($745000-$34000)		$7,11,000