Mason Company provided the following data for this year: 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 the company’s underapplied or overapplied overhead is closed to Cost of Goods Sold. 3. Prepare an income statement. Complete this question by entering your answers in the tabs below. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials. Complete this question by entering your answers in the tabs below. Prepare a schedule of cost of goods sold. Assume the company’s underapplied or overapplied overhead is closed to Cost of Goods Sold. 3. Prepare an income statement. Complete this question by entering your answers in the tabs below. Prepare an income statement.
The Correct Answer and Explanation is:
To provide the correct answer for Mason Company’s Schedule of Cost of Goods Manufactured (COGM), Schedule of Cost of Goods Sold (COGS), and Income Statement, I need the company’s financial data for the year—this includes figures such as:
- Beginning and ending inventories (Raw Materials, Work in Process, Finished Goods)
- Direct labor cost
- Manufacturing overhead (applied or actual)
- Raw materials purchased
- Sales revenue
- Selling and administrative expenses
Since you mentioned that the company assumes all raw materials used were direct materials and that overapplied or underapplied overhead is closed to COGS, here’s a generic format and example, followed by a 300-word explanation.
1. Schedule of Cost of Goods Manufactured
Mason Company
Schedule of Cost of Goods Manufactured
For the Year Ended December 31
| Description | Amount ($) |
|---|---|
| Direct materials: | |
| ‑ Raw materials inventory, beg. | 15,000 |
| ‑ Add: Raw materials purchased | 85,000 |
| ‑ Raw materials available | 100,000 |
| ‑ Less: Raw materials inventory, end | (20,000) |
| Raw materials used in production | 80,000 |
| Direct labor | 60,000 |
| Manufacturing overhead | 40,000 |
| Total manufacturing costs | 180,000 |
| Add: Beginning work in process | 10,000 |
| Subtotal | 190,000 |
| Less: Ending work in process | (12,000) |
| Cost of Goods Manufactured | 178,000 |
2. Schedule of Cost of Goods Sold
Mason Company
Schedule of Cost of Goods Sold
For the Year Ended December 31
| Description | Amount ($) |
|---|---|
| Finished goods inventory, beginning | 25,000 |
| Add: Cost of goods manufactured | 178,000 |
| Goods available for sale | 203,000 |
| Less: Finished goods inventory, ending | (23,000) |
| Unadjusted Cost of Goods Sold | 180,000 |
| Add: Underapplied overhead | 2,000 |
| Adjusted Cost of Goods Sold | 182,000 |
3. Income Statement
Mason Company
Income Statement
For the Year Ended December 31
| Description | Amount ($) |
|---|---|
| Sales revenue | 250,000 |
| Less: Cost of goods sold | (182,000) |
| Gross margin | 68,000 |
| Less: Selling and admin expenses | (30,000) |
| Net Operating Income | 38,000 |
Explanation (300+ words):
The Schedule of Cost of Goods Manufactured (COGM) is essential in determining the total manufacturing costs incurred during a specific period. In this scenario, Mason Company uses all raw materials directly in production. Hence, no indirect material cost is separated. We start with the beginning raw materials inventory, add purchases made during the year, and subtract the ending inventory to calculate the raw materials used. Direct labor and manufacturing overhead are added to determine the total manufacturing costs. Adding the beginning work-in-process inventory and subtracting the ending work-in-process inventory yields the cost of goods manufactured.
Next, in the Schedule of Cost of Goods Sold (COGS), the beginning finished goods inventory is added to the cost of goods manufactured to get the goods available for sale. Subtracting the ending finished goods inventory gives us the unadjusted COGS. Since Mason closes underapplied or overapplied overhead directly to COGS, we include this adjustment next. For example, if overhead was underapplied by $2,000, that means actual overhead exceeded the applied amount, so we add that amount to COGS.
Lastly, the Income Statement takes sales revenue and subtracts the adjusted COGS to find the gross margin. Then, subtracting selling and administrative expenses gives us the net operating income. This structure provides a clear path from production costs to profitability and is essential for managerial decision-making, pricing strategies, and performance analysis.
If you provide your specific figures, I can tailor the schedules and statements precisely to Mason Company’s data. Would you like to share the numbers?