Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials):

Selling expenses	$ 213,000
Purchases of raw materials	$ 266,000
Direct labor	?
Administrative expenses	$ 160,000
Manufacturing overhead applied to work in process	$ 375,000
Actual manufacturing overhead cost	$ 356,000

Inventory balances at the beginning and end of the year were as follows:

	Beginning	Ending
Raw materials	$ 56,000	$ 34,000
Work in process	?	$ 26,000
Finished goods	$ 37,000	?

The total manufacturing costs added to production for the year were $690,000; the cost of goods available for sale totaled $735,000; the unadjusted cost of goods sold totaled $666,000; and the net operating income was $40,000. The companys 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.)

Prepare an income statement for the year.

Superior Company
Income Statement
Sales
Cost of goods sold		647,000
Gross margin		(647,000)
Selling and administrative expenses:
Selling expenses
Administrative expenses
		0
Net operating income		$40,000

Prepare a schedule of cost of goods sold.

Superior Company
Schedule of Cost of Goods Sold
Beginning finished goods inventory	$37,000
Add: Cost of goods manufactured	698,000
Cost of goods available for sale	735,000
Less: Ending finished goods inventory	69,000
Unadjusted cost of goods sold	666,000
Less: Overapplied overhead	19,000
Adjusted cost of goods sold	$647,000

Prepare a schedule of cost of goods manufactured.

Superior Company
Schedule of Cost Goods Manufactured
Direct materials:
Beginning raw materials inventory	$56,000
Add: Purchases of raw materials	266,000
Total raw materials available	322,000
Less: Ending raw materials inventory	34,000
Direct materials used in production		$288,000
Direct labor
Manufacturing overhead applied to work in process		375,000
Total manufacturing costs added to production
Total manufacturing costs to account for
Less: Ending work in process inventory			26,000
Cost of goods manufactured