The following data from the just completed year are taken from the accounting records of Mason Company: Sales $656,000
Direct labor cost $80,000
Raw material purchases $135,000
Selling expenses $105,000
Administrative expenses $41,000
Manufacturing overhead
applied to work in process $201,000
Actual manufacturing
overhead costs $222,000

Required:
a. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.
b. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead is closed to Cost of Goods Sold.
c. Prepare an income statement.

Mason Company

a) Schedule of Cost of Goods Manufactured:

Direct labor cost                        $80,000

Raw material purchases          $135,000

Manufacturing overhead

applied to work in process     $201,000

Cost of goods manufactured $416,000

b) Schedule of Cost of Goods Sold:

Cost of goods manufactured $416,000

Under-applied overhead            21,000

Cost of goods sold                $437,000

c) Income Statement:

Sales                                $656,000

Cost of goods sold          $437,000

Gross profit                      $219,000

Selling expenses            $105,000

Administrative expenses  $41,000

Total expenses               $146,000

Net income                       $73,000

Explanation:

a) Data and Calculations:

Sales                                $656,000

Direct labor cost                $80,000

Raw material purchases $135,000

Selling expenses            $105,000

Administrative expenses $41,000

Manufacturing overhead

applied to work in process $201,000

Actual manufacturing

overhead costs                  $222,000

Under-applied overhead    $21,000 ($222,000 - $201,000)

answer; ( prices are sticky);