Superior Company provided the following data for the year ended December 31 (all
ID: 2340186 • Letter: S
Question
Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials):
Inventory balances at the beginning and end of the year were as follows:
The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $669,000; and the net operating income was $33,000. 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.)
Selling expenses $ 218,000 Purchases of raw materials $ 266,000 Direct labor ? Administrative expenses $ 155,000 Manufacturing overhead applied to work in process $ 370,000 Actual manufacturing overhead cost $ 356,000Inventory balances at the beginning and end of the year were as follows:
Beginning of Year End of Year Raw materials $ 55,000 $ 33,000 Work in process ? $ 26,000 Finished goods $ 35,000 ?The total manufacturing costs for the year were $680,000; the cost of goods available for sale totaled $745,000; the unadjusted cost of goods sold totaled $669,000; and the net operating income was $33,000. 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
Answer
Schedule Cost of Goods Manufactured
Opening Raw Material
55,000
Add: Raw material Purchased
266,000
Less: Closing Raw Material
(33,000)
Direct Material Used
288,000
Direct Labor (1)
22,000
Manufacturing Overhead applied
370,000
Total Manufacturing Cost
680,000
Add: Opening WIP (2)
56,000
Less: Closing WIP
(26,000)
Cost of Goods Manufactured (3)
710,000
(1)
Direct Labor = Total Mfg. Cost – Direct Material Used - Manufacturing Overhead applied
= $680,000 – 288,000 – 370,000
Direct Labor = $22,000
(2)
Opening WIP = Cost of Goods Manufactured + Closing WIP - Total Mfg. Cost
= $710,000 + 26,000 – 680,000
Opening WIP = $56,000
(3)
Cost of Goods Manufactured = Cost of Goods available for sale – Opening Finished Goods
= $745,000 – 35,000
Cost of Goods Manufactured = $710,000
Cost of Goods Sold
Opening Finished Goods
35,000
Add: Cost of Goods Manufactured
710,000
Cost of Goods available for sale
745,000
Less: Closing Finished Goods (4)
(76,000)
Unadjusted Cost of Goods Sold
669,000
Less: Over-applied Mfg. Overhead (5)
(14,000)
Adjusted Cost of Goods Sold
655,000
(4)
Closing Finished Goods = Cost of Goods Available for sale - Unadjusted Cost of Goods Sold
= $745,000 – 669,000
Closing Finished Goods = $76,000
(5)
Over applied Overhead = Applied Overhead - Actual Overhead
= 370,000 – 356,000
Over applied Overhead = 14,000
Income Statement
Sales Revenue(7)
1,061,000
Cost of Goods Sold
655,000
Gross Margin(6)
406,000
Selling Expenses
218,000
Adm. Expenses
155,000
Net Income
33,000
(6)
Gross Margin = Net Income + Selling Expenses + Administrative Expenses
= 33,000 + 218,000 + 155,000
Gross Margin = 406,000
(7)
Sales Revenue = Gross Margin + Cost of Goods Sold
= $406,000 + 655,000
Sales Revenue= $1,061,000
Dear Student, if u have any dobt, plz feel free to reach me.
Schedule Cost of Goods Manufactured
Opening Raw Material
55,000
Add: Raw material Purchased
266,000
Less: Closing Raw Material
(33,000)
Direct Material Used
288,000
Direct Labor (1)
22,000
Manufacturing Overhead applied
370,000
Total Manufacturing Cost
680,000
Add: Opening WIP (2)
56,000
Less: Closing WIP
(26,000)
Cost of Goods Manufactured (3)
710,000
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