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) $210,000 $268,000 Selling expenses Purchases of raw materials Direct labor Administrative expenses Manufacturing overhead applied to work in process Actual manufacturing overhead cost $157,000 $364,000 $351,000 Inventory balances at the beginning and end of the year were as follows Beginning of Year End of Year Raw materials Work in process Finished goods $57,000 38,000 ? 29,000 $33,000 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 $660,000; and the net operating income was $36,000. 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

Income Statement Sales 1050000 Cost of goods sold 647000 Gross margin 403000 Selling and administrative expenses: Selling expenses 210000 Administrative expense 157000 367000 Net operating income 36000 Schedule of Cost of Goods Sold Finished goods inventory, beginning 33000 Add: Cost of goods manufactured 712000 Cost of goods available for sale 745000 Deduct: Finished goods inventory, ending 85000 Unadjusted cost of goods sold 660000 Less: Overapplied overhead 13000 Adjusted cost of goods sold 647000 Schedule of Cost of Goods Manufactured Direct materials: Raw materials inventory, beginning 57000 Add: Purchases of raw materials 268000 Total raw materials available 325000 Deduct: Raw materials inventory, ending 38000 Raw materials used in production 287000 Direct labor 29000 Manufacturing overhead applied to work in process inventory 364000 Total manufacturing costs 680000 Add: Beginning work in process inventory 61000 741000 Deduct: Ending work in process inventory 29000 Cost of goods manufactured 712000

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