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 Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 212,000 $ 268,000 ? $ 156,000 $ 371,000 $ 351,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods of Year End of Year $ 51,000 $ 38,000 ? $ 30,000 $ 35,000 The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $664,000; and the net operating income was $39,000. 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

1) Income statement

Sales		1051000
Cost of goods sold (664000-20000)		644000
Gross profit		407000
Selling and administrative expense
Selling expense	212000
Administrative expense	156000
Total Selling and administrative expense		368000
Net income		39000

2) Schedule of cost of goods sold

Beginning finished goods	35000
Cost of goods manufactured	710000
Cost of goods available for sale	745000
Ending finished goods	81000
Unadjusted cost of goods sold	664000
Less: Over applied overhead	-20000
Adjusted cost of goods sold	644000

3) Schedule of cost of goods manufactured

Direct material used
Beginning raw material	51000
Raw material purchase	268000
Raw material available for use	319000
less: Ending raw material	-38000
Direct material used		281000
Direct labor		28000
Manufacturing overhead applied		371000
Total manufacturing cost		680000
Beginning work in process		60000
Total cost of work in process		740000
Less: Ending work in process		30000
Cost of goods manufactured		710000