The following data from the just completed year are taken from the accounting records of Mason Company: Sales$657,000 Direct labor cost$84,000 Raw material purchases$131,000 Selling expenses$107,000 Administrative expenses$46,000 Manufacturing overhead applied to work in process$203,000 Actual manufacturing overhead costs$229,000 Raw materials$8,000$10,000 Work in process$5,300$21,000 Finished goods$78,000$25,900 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.

Cost Of Goods  Manufactured  $ 426,300

Adjusted Cost Of Goods Sold    $ 478,400

Gross Profit   $178,600

Net Profit   $ 25,600

Explanation:

A schedule of cost of goods manufactured, a schedule of Cost of Goods Sold and an income statement require the same steps.

Beginning with raw materials inventories  we add and subtract as given below.

Mason Company:

Cost Of Goods Manufactured Statement

Inventories Beginning Raw materials    $ 8,000

Add         Raw material purchases        $ 131,000

Less Inventories Ending Raw materials $10,000

Direct Materials Used                             $ 129,000

Direct labor cost                              $84,000  

Actual manufacturing overhead costs  $  229,000

Total Manufacturing Costs                        $ 442,000

Add Inventories Beginning Work in process  $5,300

Cost Of Goods Available For Manufacture  $ 447,300

Less Inventories  Ending  Work in process    $21,000

Cost Of Goods  Manufactured                  $ 426,300

Mason Company:

Cost OF Goods Sold Statement

Inventories Beginning Raw materials    $ 8,000

Add         Raw material purchases        $ 131,000

Less Inventories Ending Raw materials $10,000

Direct Materials Used                             $ 129,000

Direct labor cost                              $84,000  

Applied manufacturing overhead costs  $  203,000

Total Manufacturing Costs                        $ 416,000

Add Inventories Beginning Work in process  $5,300

Cost Of Goods Available For Manufacture  $ 421,300

Less Inventories  Ending  Work in process    $21,000

Cost Of Goods Available For Manufactured  $ 400,300

Add Inventories Beginning Finished goods  $78,000

Cost Of Goods Available For Sale $ 478,300

Less Inventories Ending  Finished goods $25,900

Cost Of Goods Sold before Adjustment $ 452,400

Add Under applied  Manufacturing Overhead $ 26000

Adjusted Cost Of Goods Sold    $ 478,400

Mason Company:

Income Statement

Sales                                                                                 $ 657,000

Inventories Beginning Raw materials    $ 8,000

Add         Raw material purchases        $ 131,000

Less Inventories Ending Raw materials $10,000

Direct Materials Used                             $ 129,000

Direct labor cost                              $84,000  

Actual manufacturing overhead costs  $  229,000

Total Manufacturing Costs                        $ 442,000

Add Inventories Beginning Work in process  $5,300

Cost Of Goods Available For Manufacture  $ 447,300

Less Inventories  Ending  Work in process    $21,000

Cost Of Goods Available For Manufactured  $ 426,300

Add Inventories Beginning Finished goods  $78,000

Cost Of Goods Available For Sale $ 504,300

Less Inventories Ending  Finished goods $25,900

Cost Of Goods Sold                                                        ($ 478,400)

Gross Profit                                                                       $178,600

Less Selling expenses   $  107,000

Less Administrative expenses   $  46,000                     $ ( 153,000)

Net Profit                                                                              $ 25,600