Superior Company provided the following account balances for the year ended Dece

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 expense Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Total actual manufacturing overhead costs $219,000 $264,000 $159,000 $333,000 $352,000 Inventory balances at the beginning and end of the year were as follows Beginning of Year $51,000 End of Year $ 32,000 $26,000 Raw materials Work in process Finished goods $ 37,000 The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $665,000; and the net operating income was $40,000 The company's overapplied or underapplied overhead is closed entirely to Cost of Goods Sold (Hint Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of goods manufactured.) Required a. Prepare a schedule of cost of goods manufactured SUPERIOR COMPANY Schedule of Cost Goods Manufactured Direct materials Raw materials available Raw materials used in production Total manufacturing costs Cost of goods manufactured

Explanation / Answer

a) Schedule of Cost of goods manufactured

Direct material:

Beginning raw material 51000

add: purchase of raw material 264000

   raw material available 315000

less: ending raw material    32000

Raw material used in production 283000

Direct labor 64000

manufacturing overhead applied 333000   

   Total manufacturing costs 680000

Add: beginning work in process[693000+26000-680000] 39000

less: Ending work in process    26000   

cost of goods manufactured [calculated] 693000

b) Schedule of Cost of goods sold

Beginning finished goods = 37000

Add: cost of goods manufactured = 693000

Cost of goods available for sale (given) = 730000

less: ending finished goods = 65000

unadjusted cost of goods sold(given) = 665000

add: Underapplied overhead [352000-333000] = 19000

   Adjusted cost of goods sold = $684000

c) Income statement

sale $1102000

   less: Adjusted cost of goods sold $684000

   Gross margin 418000

less: selling and administrative expenses:

selling expense 219000

administrative expenses   159000       378000   

Net operating income 40000

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