Superior Company provided the following account balances for the year ended Dece
ID: 2418732 • 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 material
Selling expenses............................................$214,000
Purchases of raw materials............................$263,000
Direct labor...................................................... ?
Administrative expenses.................................. $158,000
Manufacturing overhead applied to work in progress..........$338,000
Total actual manufacturing overhead costs..........................$351,000
Inventory balances at the beginning and end of the year were as follows:
Beginning of the Year End of the Year
Raw materials $55,000 $35,000
Work in Progress ? $23,000
Finished goods $39,000 ?
The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $669,000; and the net operating income was $37,000. The company's overapplied or underapplied overhead is closed entirely to Cost of Goods Sold.
1. Prepare a schedule of cost of goods manufactured.
2. Prepare a schedule of cost of goods sold.
3. Prepare an income statement for the year.
Explanation / Answer
Total manufacturing costs:
= Direct Material + Direct Labor + Direct Overhead
= [Op Material+ Purchases- Cl. Material]+ Direct Labor+ Total actual manufacturing overhead
$675,000=[$55,000+$263,000-$35,000]+Direct Labor+$351,000
$675,000=[$55,000+$263,000-$35,000]+Direct Labor+$351,000
$675,000=$283,000+$351,000+ Direct Labor
$675,000=$634,000+ Direct Labor
Direct Labor=$675,000-$634,000
Direct Labor=$41,000
Computation of Cost of Goods Manufactured:
Cost of Goods Available for Sale= Beginning Finished Goods Inventory+ Cost of Goods Manufactured
$730,000= $39,000+Cost of Goods Manufactured
Cost of Goods Manufactured=$730,000-$39,000=$691,000
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Computation of Opening Work in progess
Cost of Goods manufactured
=Op Wip+ Direct material consumed + Direct labor+ Factory overhead- ending WIP
=Op Wip+ Toal Manufacturing cost- ending WIP
$691,000= Op Wip+$691,000-$23,000
$691,000=Op Wip +$668,000
Op Wip=$691,000-$668,000=$23,000
Computation of overhead over applied or under applied
Manufacturing overhead applied to work in progress..........$338,000
Total actual manufacturing overhead costs..........................$351,000
This Under applied= $351,000-$338,000=$13,000
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Computation cost of Goods sold
adjusted cost of Goods sold=unadjusted cost of Goods sold+ Under applied Overhead
=$669,000+$13,000=$682,000
Computation Ending Finished Goods:
Cost of Goods Available for sale=unadjusted cost of Goods sold+ Ending Finished Goods
$730,000=$669,000+ Ending Inventory
Ending Finished Goods=$730,000-$669,000=$61,000
Sales=Cost of Goods Sold+Selling Exp + Administrative Exp+ Operating Income
=$682,000+$214,000+$158,000+$37,000
=$1,091,000
Statement of Cost of Goods Manufactured
For the Month Ended March 31
Direct Materials
Beginning Inventory
$55,000
Purchases
263,000
Direct Materials Available
318,000
Ending Direct Materials Inventory
-35,000
Direct Materials Used
283,000
Direct Labor
41,000
Factory Overhead
351,000
Total Manufacturing Cost
675,000
Beginning Work-in-Process Inventory
5,000
Total Manufacturing Cost
675,000
Less: Ending Work-in-Process Inventory
23,000
Cost of Goods Manufactured
$691,000
Beginning Finished Goods
39,000
Add: Cost of Goods Manufactured
691,000
Total Cost of Goods available for sale
730,000
Less: Ending Finished Goods
61,000
Unadjusted Cost of Goods sold
669,000
Add: Under Appiled
13,000
adjusted Cost of Goods sold
682,000
Superior Company
Income Statement
For the Month Ended March 31
Sales
$1,091,000
Cost of Goods Sold
Beginning Finished Goods Inventory
39,000
Cost of Goods Manufactured
691,000
Cost of Goods Available for Sale
730,000
- Ending Finished Goods Inventory
61,000
Unadjusted Cost of Goods sold
669,000
Add: Under Appiled
13,000
682,000
Gross Margin
409,000
Selling Expenses
214,000
Administrative Expenses
158,000
Operating Income
37,000
Statement of Cost of Goods Manufactured
For the Month Ended March 31
Direct Materials
Beginning Inventory
$55,000
Purchases
263,000
Direct Materials Available
318,000
Ending Direct Materials Inventory
-35,000
Direct Materials Used
283,000
Direct Labor
41,000
Factory Overhead
351,000
Total Manufacturing Cost
675,000
Beginning Work-in-Process Inventory
5,000
Total Manufacturing Cost
675,000
Less: Ending Work-in-Process Inventory
23,000
Cost of Goods Manufactured
$691,000
Beginning Finished Goods
39,000
Add: Cost of Goods Manufactured
691,000
Total Cost of Goods available for sale
730,000
Less: Ending Finished Goods
61,000
Unadjusted Cost of Goods sold
669,000
Add: Under Appiled
13,000
adjusted Cost of Goods sold
682,000
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