The following data from the just completed year are taken from the accounting re

Question

The following data from the just completed year are taken from the accounting records of Mason Company:

Required:

1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.

2. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold.

3. Prepare an income statement.

   Sales $ 658,000 Direct labor cost $ 81,000 Raw material purchases $ 137,000 Selling expenses $ 101,000 Administrative expenses $ 45,000 Manufacturing overhead applied to work in process $ 207,000 Actual manufacturing overhead costs $ 230,000

Explanation / Answer

Mason Company Schedule of Cost of Goods Manufactured Direct materials: Beginning raw materials inventory $8,100 Add: Purchases of raw materials 137,000 Raw materials available for use 145,100 Less: Ending raw materials inventory 10,500 Raw materials used in production $134,600 Direct labor 81,000 Manufacturing overhead 207,000 Total manufacturing costs 422,600 Add: Beginning work in process inventory 5,100 427,700 Less: Ending work in process inventory 20,600 Cost of goods manufactured $407,100 2 Mason Company Schedule of Cost of Goods Sold Beginning finished goods inventory $72,000 Add: Cost of goods manufactured 407,100 Goods available for sale 479,100 Less: Ending finished goods inventory 25,800 Unadjusted cost of goods sold 453,300 Add: Underapplied overhead 23000 Adjusted cost of goods sold $476,300 3 Mason Company Income Statement Sales $658,000 Cost of goods sold $476,300 Gross margin 181,700 Selling and administrative expenses: Selling expenses 101,000 Administrative expense 45,000 146,000 Net operating income 35,700

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