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): Selling expenses $ 212,000 Purchases of raw materials $ 261,000 Direct labor ? Administrative expenses $ 157,000 Manufacturing overhead applied to work in process $ 371,000 Actual manufacturing overhead cost $ 357,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 60,000 $ 31,000 Work in process ? $ 27,000 Finished goods $ 35,000 ? The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $750,000; the unadjusted cost of goods sold totaled $664,000; 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.)

Explanation / Answer

Superior Company

Schedule of Cost of Goods Manufactured

Direct materials;

Raw materials inventory, beginning

$60000

+ Purchase of raw materials

$261000

Total taw materials available

$321000

- Raw materials inventory, ending

$31000

Raw materials used in production

$290000

+ Direct labor

$19000

+ Manufacturing overhead applied to work in process inventory

$371000

Total manufacuring costs

$680000

+ Beginning WIP inventory

$62000

- Ending WIP inventory

$27000

Cost of goods manufactured

$715000

Superior Company

Schedule of Cost of Goods Sold

Finished goods inventory, beginning

$35000

+ Cost of goods manufactured

$715000

Cost of goods available for sale

$750000

- Finished goods inventory, ending

$86000

Unadjusted cost of goods sold

$664000

- Overapplied overhead

$14000

Adjusted cost of goods sold

$650000

Superior Company

Income Statement

Sales

$1057000

Less: Cost of Goods Sold

$650000

Gross profit

$407000

Less: Admistrative & Selling Expenses;

Selling expenses

$212000

Administrative expenses

$157000

$369000

Net operating income

$38000

Superior Company

Schedule of Cost of Goods Manufactured

Direct materials;

Raw materials inventory, beginning

$60000

+ Purchase of raw materials

$261000

Total taw materials available

$321000

- Raw materials inventory, ending

$31000

Raw materials used in production

$290000

+ Direct labor

$19000

+ Manufacturing overhead applied to work in process inventory

$371000

Total manufacuring costs

$680000

+ Beginning WIP inventory

$62000

- Ending WIP inventory

$27000

Cost of goods manufactured

$715000

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