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 diredt materials): $ 218,000 $ 267,0e0 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $153,000 $ 366,000 $ 353,000 Inventory balances at the beginning and end of the year were as follows Beginning of Year End of Year Raw materials Work in process Finished goods $ 52,000 38,000 ? 33,000 $38,000 The total manufacturing costs for the year were $685,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $663,000; and the net operating income was $32,000. 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.)

Explanation / Answer

Schedule of Cost of Goods Manufactured Direct materials: Raw materials inventory, beginning 52000 Add: Purchases of raw materials 267000 Total raw materials available 319000 Deduct: Raw materials inventory, ending 38000 Raw materials used in production 281000 Direct labor 38000 Manufacturing overhead applied to work in process inventory 366000 Total manufacturing costs 685000 Add: Beginning work in process inventory 45000 730000 Deduct: Ending work in process inventory 33000 Cost of goods manufactured 697000 Schedule of Cost of Goods Sold Finished goods inventory, beginning 38000 Add: Cost of goods manufactured 697000 Cost of goods available for sale 735000 Deduct: Finished goods inventory, ending 72000 Unadjusted cost of goods sold 663000 Less: Overapplied overhead 13000 Adjusted cost of goods sold 650000 Income Statement Sales 1053000 Cost of goods sold 650000 Gross margin . 403000 Selling and administrative expenses: Selling expenses 218000 Administrative expense 153000 371000 Net operating income 32000

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