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	$	216,000
Purchases of raw materials	$	268,000
Direct labor		?
Administrative expenses	$	153,000
Manufacturing overhead applied to work in process	$	372,000
Actual manufacturing overhead cost	$	358,000

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

	Beginning of Year			End of Year
Raw materials	$	52,000		$	38,000
Work in process		?		$	32,000
Finished goods	$	39,000			?

The total manufacturing costs for the year were $690,000; the cost of goods available for sale totaled $725,000; the unadjusted cost of goods sold totaled $661,000; 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.)

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): $ 216, $ 268, eee Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $ 153,000 $ 372,000 $ 358,800 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of Year End of Year $ 52,000 38,000 ? $ 32,000 $ 39,000 ? The total manufacturing costs for the year were $690,000; the cost of goods available for sale totaled $725,000; the unadjusted cost of goods sold totaled $661,000; 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.) Complete this question by entering your answers in the tabs below. Income Statement COGS Schedule COGM Schedule Prepare an income statement for the year. Superior Company Income Statement Sales 0 Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses 0 Net operating income Income Statement COGS Schedule >

Answer 1

Answer :

Step -1

Superior Company
Income statement
Sales		$ 1054000
Cost of goods sold ( Adjusted)		$ 647000
Gross margin		$ 407000
Selling and administrative expenses :
Selling Expenses	$ 216000
Adminstrative expenses	$ 153000	$ 369000
Net Operating Income		$ 38000

Working note -1

Cost of goods sold ( Adjusted)

= Unadjusted cogs - Over applied overhead

= $ 661000 - $ 14000

= $ 647000

Overapplied overhead = Manufacturing overhead applied - Actual Manufacuring overhead

= $ 372000 - $ 358000

= $ 14000

Working Note -2

Computation of sales

Sales = cost of goods sold (adjusted) + Gross margin

= $ 647000 + $ 407000

= $ 1054000

Gross margin = Net operating income + Selling and administrative expenses

= $ 38000 + $ 369000 = $ 407000

Step -2

Superior company
schedules of cost of goods sold
Beginning Finished goods Inventory	$ 39000
Add - cost of goods manufactured	$ 686000
Cost of goods available for sale	$ 725000
Less - Ending Finished goods Inventory	$ 64000
Unadjusted cost of goods sold	$ 661000
Less - Overapplied overhead	$ 14000
Adjusted Cost of goods sold	$ 647000

Working note -3

Cost of goods manufactured =  Cost of goods available for sale -  Beginning Finished goods Inventory

= $ 725000 - $ 39000 = $ 686000

Working note -4

Ending Finished goods Inventory =  Cost of goods available for sale -, Unadjusted cost of goods sold

= $ 725000 - $ 661000 = $ 64000

Step -3

Superior company
schedules of cost of goods manufactured
Direct Materials :
Beginning raw material Inventory	$ 52000
Add : Purchase of raw material	$ 268000
Total raw materials available	$ 320000
Less - Ending Raw material Inventory	$ 38000
Raw material used in production		$ 282000
Direct Labor		$ 36000
Manufacturing overhead applied to Work in process		$ 372000
Total Manufacturing cost		$ 690000
Add : Beginning Work in proess Inventory		$ 28000
Less : Ending Work in process Inventory		$ 32000
Cost of Goods manufactured		$ 686000

Working note -5

Direct Labor = Total Manufacturing cost - Manufacturing overhead applied to Work in process - Raw material used in production

= $ 690000 - $ 372000 - $ 282000 = $ 36000

Working note -6

Beginning Work in proess Inventory =   Cost of Goods manufactured + Ending Work in process Inventory - Total Manufacturing cost

= $ 686000 + $ 32000 - $ 690000

= $ 28000