Question

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

Sales	$	655,000
Direct labor cost	$	86,000
Raw material purchases	$	132,000
Selling expenses	$	108,000
Administrative expenses	$	40,000
Manufacturing overhead applied to work in process	$	201,000
Actual manufacturing overhead costs	$	222,000

Inventories	Beginning		Ending
Raw materials	$	8,300	$	10,800
Work in process	$	5,100	$	20,900
Finished goods	$	71,000	$	25,100

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

Solution -

Schedule of Cost of goods manufactured Particulars Amount Direct Material Beginning raw material inventory Add: Purchases of raw material Raw material availbale for use Less: Ending raw material inventory Raw material used in production Direct labor Cost Manufacturing overhead cost applied to work in process Total manufacturing costs Add: Beginning WIP 8300 132000 140300 10800 129500 86000 201000 416500 5100 421600 Less: Ending WIP Inventory Cost of goods manufactured 20900 400700 Schedule of Cost of goods sold Particulars Amount Beginning finished goods inventory Add: Costs of goods manufactured Goods available for sale Less: Ending finished goods inventory Unadjusted cost of goods sold Add: Underapplied overhead (222000-2010000) Adjusted cost of goods sold 71000 400700 471700 25100 446600 21000 467600 Income Statement Particulars Amount Sales Cost of goods sold Gross margin Selling & administration expense 655000 467600 187400 108000 40000 -148000 Net operating income 39400