Superior Company provided the following data for the year ended December 31 (all

Question

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials):

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

The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $740,000; the unadjusted cost of goods sold totaled $668,000; and the net operating income was $30,000. 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.)

Selling expenses $ 213,000 Purchases of raw materials $ 266,000 Direct labor ? Administrative expenses $ 158,000 Manufacturing overhead applied to work in process $ 374,000 Actual manufacturing overhead cost $ 355,000

Explanation / Answer

Sales: Cost of Goods sold (adjusted) 649000 Add: Selling expense 213000 Add: Operating income 30000 Sales   892000 Total Manufacturing cost 675000 Less: Raw material consumed Beginning inventory 54000 Add: Purchase 266000 Raw material available for use 320000 Less: Ending inventory 37000 283000 Manufacturing OH applied 374000 Direct labor cost 18000 Cost of goods available for sale 740000 Less: Beginning FG inventory 36000 Cost of goods manufactured 704000 Add: Ending WIP inventory 27000 731000 Less: Total manufacturing cost 675000 Beginning Inventory of WIP 56000 Cost of goods available for sale 740000 Less: Cost of Goods sold 668000 Ending inventory of Finished Goods 72000 Schedule of Cost of Goods manufactured Beginning inventory of WIP 56000 Add: Current Manufacturing cost Material consumed Beginning inventory of RM 54000 Add: Purchases 266000 Raw material available for use 320000 Less: Ending inventory of RM 37000 Material consumed 283000 Direct labor 18000 Manufacturing Overheads 374000 Total manufacturing cost 675000 Total cost of goods manufacturing 731000 Less: Ending inventory of WIP 27000 Cost of Goods manufactured 704000 Schedule of Cost of Goods sold: Beginning inventory of FG 36000 Add: Cost of Goods manufactured 704000 Cost of goods available for sale 740000 Less: Ending inventory of FG 72000 Cost of Goods sold (unadjusted) 668000 Less: Overapplied Overheads (374000-355000) 19000 Cost of Goods sold (Adjusted) 649000 Income Statement Sales 892000 Less: Adjusted cost of goods sold 649000 Gross margin 243000 Less: Selling expense 213000 Operating income 30000

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