Superior Company provided the following account balances for the year ended Dece
ID: 2416447 • Letter: S
Question
Superior Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials): Selling expenses $ 215,000 Purchases of raw materials $ 261,000 Direct labor ? Administrative expenses $ 160,000 Manufacturing overhead applied to work in process $ 336,000 Total actual manufacturing overhead costs $ 355,000 Inventory balances at the beginning and end of the year were as follows: Beginning of Year End of Year Raw materials $ 56,000 $ 36,000 Work in process ? $ 33,000 Finished goods $ 32,000 ? 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 $666,000; and the net operating income was $40,000. The company’s overapplied or underapplied overhead is closed entirely to Cost of Goods Sold. Required: a. Prepare a schedule of cost of goods manufactured. b. Prepare a schedule of cost of goods sold. c. Prepare an income statement for the year.
Explanation / Answer
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Question:
Selling expenses $ 217,000
Purchases of raw materials $ 264,000
Direct labor ?
Administrative expenses $ 159,000
Manufacturing overhead applied to work in process $ 334,000
Total actual manufacturing overhead costs $ 352,000
Inventory balances at the beginning and end of the year were as follows:
Beginning of Year End of Year
Raw materials $ 55,000 $ 37,000
Work in process ? $ 27,000
Finished goods $ 37,000 ?
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 $664,000; and the net operating income was $38,000. The company’s overapplied or underapplied overhead is closed entirely to cost of goods sold.
Solution:
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning $ 55,000
Add : Purchases of raw materials 264,000
Total raw materials available 319,000
Deduct : Raw materials inventory, ending 37,000
Raw materials used in production 282,000
Direct labor 69,000
Manufacturing overhead applied to work in process inventory 334,000
Total manufacturing cost 685,000
Add : Beginning work in process inventory 40,000
725,000
Deduct : Ending work in process inventory 27,000
Cost of goods manufactured $ 698,000
b.
Schedule of Cost of Goods Sold
Finished goods inventory, beginning $ 37,000
Add : Cost of goods manufactured 698,000
Cost of goods available for sale 735,000
Deduct : Finished goods inventory, ending 71,000
Unadjusted cost of goods sold 664,000
Add : Underapplied overhead 18,000
Adjusted cost of goods sold $ 682,000
c.
Income Statement
Sales $ 1096000
Cost of goods sold 682,000
Gross margin 414000
Selling and administrative expenses:
Administrative expense $
159,000
Selling expenses
217,000
376,000
Net operating income $ 38,000
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