Superior Company provided the following data for the year en

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 $740,000; the unadjusted cost of goods sold totaled $662,000; and the net operating income was $40,000. 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	$	210,000
Purchases of raw materials	$	265,000
Direct labor		?
Administrative expenses	$	150,000
Manufacturing overhead applied to work in process	$	373,000
Actual manufacturing overhead cost	$	360,000

Solution

Schedule of Cost of Goods Manufactured Direct Materials: Raw Materials inventory,beginning 50,000 Add:purchases of raw materials 265,000 total raw materials available 315,000 Deduct:Raw materials inventory ,ending 31,000 Raw Materials used in production 284,000 Direct Labor 23,000 Manufacturing overhead Applied to WIP 373,000 total manufacturing costs 680,000 Add:Beginning work in process inventory 60,000 740,000 Deduct:Ending work in process inventory 31,000 Cost of goods manufactured 709,000 Schedule of Cost of Goods sold Finished goods inventory,beginning 31,000 Add:Cost of goods manuactured 709,000 Cost of goods available for sale 740,000 Deduct:Finished goods inventory,ending 78,000 Unadjusted cost of goods sold 662,000 less::overapplied overhead 13000 Adjusted cost of goods sold 649,000 Income statement Sales 1,049,000 cost of good sold 649,000 Gross margin 400,000 Selling and administrative expense Selling expenses 210,000 Administrative expense 150,000 360,000 Net operating income 40,000