Question

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

Sales	$	650,000
Direct labor cost	$	89,000
Raw material purchases	$	132,000
Selling expenses	$	106,000
Administrative expenses	$	42,000
Manufacturing overhead applied to work in process	$	202,000
Actual manufacturing overhead costs	$	228,000

Inventories	Beginning		Ending
Raw materials	$	8,900	$	10,300
Work in process	$	5,900	$	20,100
Finished goods	$	74,000	$	25,200

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

Mason company
Schedule of Cost of Goods Manufactured
Direct Material
Raw material Inventory Beginning	$ 8,900
Raw material Purchased	$ 132,000
Raw material available for use	$ 140,900
Less: Raw material Inventory Ending	$ 10,300
Direct Material Used		$ 130,600
Direct labor		$ 89,000
Total Manufacturing overheads applied		$ 202,000
Total manufacturing Cost During the month		$ 421,600
Add: Work in process Beginning		$ 5,900
Total Work in Process		$ 427,500
Less: Work in progress Ending		$ 20,100
Cost of Goods Manufactured		$ 407,400

.

Mason company
Schedule of cost of goods sold
Beginning Finished Goods Inventory		$ 74,000
Add: Cost of goods manufactured		$ 407,400
Goods Available for sale		$ 481,400
Less :Ending Finished goods Inventory		$ 25,200
Unadjusted Cost of Goods Sold		$ 456,200
Underapplied Manufacturing overheads		$ 26,000
Adjusted cost of goods sold		$ 482,200

.

Mason company
Income statement
Sales revenue		$ 650,000
Less: Cost of goods sold		$ 482,200
Gross profit		$ 167,800
Selling and administrative expenses
Selling expenses	$ 106,000
Administrative expenses'	$ 42,000	$ 148,000
Net income		$ 19,800