Question

The following data from the just completed year are taken from the accounting records of Mason Company: Sales $ 652,000 Direct labor cost $ 81,000 Raw material purchases $ 133,000 Selling expenses $ 102,000 Administrative expenses $ 43,000 Manufacturing overhead applied to work in process $ 205,000 Actual manufacturing overhead costs $ 223,000 Inventories Beginning Ending Raw materials $ 8,000 $ 10,100 Work in process $ 5,400 $ 20,400 Finished goods $ 70,000 $ 25,500 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:

Beginning Raw Materials 8,000

Purchases                      133,000

Ending Raw materials       (10,100)

Used into production      130,900

Beginning WIP     5,400

cost added   416,900

total cost  422,300

ending WIP   (20,400)

COGM          401,900

Beginning FG        70,000

COGM               401,900

goods available    471,900

ending FG       (25,500)

COGG               446,400

Overhead 18,000 udnerapplied

Sales             652,000

COGM          (464,400)  - (446,400 + 18,000)

Gross Profit   187, 600‬

S&A               (145,000)

Net income     42,600

Explanation:

We work the following reasoning:

the beginning inventory are the materials at hand at the beginning then we add up the purchases and compare with ending ivnentory. The difference was used into production.

Same thinking applpies to how to calculate for cost of goods manufactured and cost of goods sold.

side calculation:

cost added during the period:

mateirals used + direct labor + applied overhead

Overhead:

actual   223,000

applies 205,000

as the cost were higher we will adjust to increase overhead by 18,000 It was underapplied

This will increase the COGS in the income statement.

Net income:

we will calculate the net income by subtracting the COGS and the expenses from the sales revenues.