Question

The following data from the just completed year are taken from the accounting records of Mason Company: Sales $ 659,000 Direct labor cost $ 88,000 Raw material purchases $ 135,000 Selling expenses $ 104,000 Administrative expenses $ 49,000 Manufacturing overhead applied to work in process $ 209,000 Actual manufacturing overhead costs $ 221,000 Inventories Beginning Ending Raw materials $ 8,600 $ 10,200 Work in process $ 5,400 $ 20,200 Finished goods $ 78,000 $ 25,600 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.

Answer 1

Answer:

1. Schedule of cost of goods manufactured.

Beginning Work in Process                                                      $ 5,400

Direct labor cost                                                                      $ 88,000

Direct Material Costs :

Beginning Inventory                                             $ 8,600

Add Raw material purchases                           $ 135,000

Less Ending Inventory                                      ($ 10,200)    $ 133,400

Manufacturing Overhead applied                                       $ 209,000

Ending Work in Process                                                        ($ 20,200)

Cost of goods manufactured                                                 $415,600

Under-applied overheads = $12,000 ($ 221,000 - $ 209,000)

2. Schedule of cost of goods sold.

Beginning Finished Goods Inventory                                   $ 78,000

Add Cost of Goods Manufactured                                       $ 415,600

Less Ending Finished Goods Inventory                               ($ 25,600)

Cost of goods sold                                                                $467,400

Add Under-applied overheads                                               $12,000

Adjusted Cost of goods sold                                                $479,400

3. Income statement.

Sales                                                                   $ 659,000

Less Cost of Goods Sold                                  ($479,400)

Gross Profit                                                          $179,600

Less Expenses

Selling expenses                          $ 104,000

Administrative expenses              $ 49,000     ($153,000)

Net Income (Loss)                                                $26,600

Explanation:

See the schedules including the income statement prepared above.