PROBLEM 2–21 Schedule of Cost of Goods Manufactured; Income Statement; Cost Beha

Question

PROBLEM 2–21 Schedule of Cost of Goods Manufactured; Income Statement; Cost Behavior [ LO2 ,
LO3 , LO4 , LO5 , LO6 ]
Selected account balances for the year ended December 31 are provided below for Superior Company:
Selling and administrative salaries . . . . . . . . . . . . $110,000
Purchases of raw materials . . . . . . . . . . . . . . . . . . $290,000
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Advertising expense . . . . . . . . . . . . . . . . . . . . . . . $80,000
Manufacturing overhead . . . . . . . . . . . . . . . . . . . . $270,000
Sales commissions . . . . . . . . . . . . . . . . . . . . . . . . $50,000
Inventory ba lances a t t he be ginning a nd end of t he ye ar w ere a s f ollows:
Beginning of End of
the Year the Year
Raw materials . . . . . . . . . . . . . . $40,000 $10,000
Work in process . . . . . . . . . . . . . ? $35,000
Finished goods . .......................... $50,000 ?
The total manufacturing costs for the year were $683,000; the goods available for sale totaled
$740,000; and the cost of goods sold totaled $660,000.
Required:
1. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the company’s income statement for the year.

Explanation / Answer

Superior Company Schedule of Cost of Goods Manufactured For the Year Ended December 31 Direct materials: Raw materials inventory, beginning (given) $ 40,000 Add: Purchases of raw materials (given) 290,000 Raw materials available for use 330,000 Deduct: Raw materials inventory, ending (given) (10,000) Raw materials used in production $320,000 Direct labor 93,000* Manufacturing overhead (given) 270,000 Total manufacturing costs (given) 683,000 Add: Work in process inventory, beginning 42,000* 725,000 Deduct: Work in process inventory, ending (given) (35,000) Cost of goods manufactured $690,000 The cost of goods sold section of the income statement follows: Finished goods inventory, beginning (given) $ 50,000 Add: Cost of goods manufactured 690,000* Goods available for sale (given) 740,000 Deduct: Finished goods inventory, ending (80,000)* Cost of goods sold (given) $660,000 *These items must be computed by working backwards up through the statements.

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