Superior Company provided the following data for the year ended December 31 (all

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 $690,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $663,000; and the net operating income was $39,000. 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 $ 212,000 Purchases of raw materials $ 270,000 Direct labor ? Administrative expenses $ 156,000 Manufacturing overhead applied to work in process $ 364,000 Actual manufacturing overhead cost $ 353,000

Explanation / Answer

Schedule of Cost of Goods Manufactured Direct Materials: Raw Materials inventory,beginning 55,000 Add:purchases of raw materials 270,000 total raw materials available 325,000 Deduct:Raw materials inventory ,ending 39,000 Raw Materials used in production 286,000 Direct Labor 40,000 Manufacturing overhead Applied to WIP 364,000 total manufacturing costs 690,000 Add:Beginning work in process inventory 42,000 732,000 Deduct:Ending work in process inventory 28,000 Cost of goods manufactured 704,000 Schedule of Cost of Goods sold Finished goods inventory,beginning 31,000 Add:Cost of goods manuactured 704,000 Cost of goods available for sale 735,000 Deduct:Finished goods inventory,ending 72,000 Unadjusted cost of goods sold 663,000 less::overapplied overhead 11000 Adjusted cost of goods sold 652,000 Income statement Sales 1,059,000 cost of good sold 652,000 Gross margin 407,000 Selling and administrative expense Selling expenses 212,000 Administrative expense 156,000 368,000 Net operating income 39,000

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