QUESTION 1
Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials):
| Selling expenses | $ | 210,000 |
| Purchases of raw materials | $ | 266,000 |
| Direct labor | ? | |
| Administrative expenses | $ | 159,000 |
| Manufacturing overhead applied to work in process | $ | 372,000 |
| Actual manufacturing overhead cost | $ | 357,000 |
Inventory balances at the beginning and end of the year were as follows:
| Beginning of Year | End of Year | |||||
| Raw materials | $ | 52,000 | $ | 38,000 | ||
| Work in process | ? | $ | 23,000 | |||
| Finished goods | $ | 35,000 | ? | |||
The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $725,000; the unadjusted cost of goods sold totaled $664,000; and the net operating income was $30,000. 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.)
QUESTION 2
Osborn Manufacturing uses a predetermined overhead rate of $19.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $249,600 of total manufacturing overhead for an estimated activity level of 13,000 direct labor-hours.
The company actually incurred $247,000 of manufacturing overhead and 12,500 direct labor-hours during the period.