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

1. In the schedule of cost of goods manufactured, the cost of goods sold is calculated based on the raw materials used in production, direct labor cost, and manufacturing overhead applied. 2. The schedule of cost of goods sold is calculated based on the beginning and ending inventories of finished goods and the cost of goods manufactured. 3. The income statement shows the sales revenue, cost of goods sold, gross profit, and net operating income.

Step-by-step explanation:

1. Schedule of Cost of Goods Manufactured:

Beginning raw materials inventory: $8,000

Raw material purchases: $133,000

Total raw materials available: $141,000

Ending raw materials inventory: $10,100

Raw materials used in production: $130,900

Direct labor cost: $81,000

Manufacturing overhead applied: $205,000

Total manufacturing costs: $416,900

Beginning work in process inventory: $5,400

Total cost to account for: $422,300

Ending work in process inventory: $20,400

Cost of goods manufactured: $401,900

2. Schedule of Cost of Goods Sold:

Beginning finished goods inventory: $70,000

Cost of goods manufactured: $401,900

Total cost of goods available for sale: $471,900

Ending finished goods inventory: $25,500

Cost of goods sold: $446,400

3. Income Statement:

Sales revenue: $652,000

Cost of goods sold: $446,400

Gross profit: $205,600

Selling expenses: $102,000

Administrative expenses: $43,000

Net operating income: $60,600