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The following data from the just completed year are taken from the accounting records of Mason Company:

Sales	$	660,000
Direct labor cost	$	81,000
Raw material purchases	$	140,000
Selling expenses	$	103,000
Administrative expenses	$	43,000
Manufacturing overhead applied to work in process	$	201,000
Actual manufacturing overhead costs	$	225,000

Inventories	Beginning of Year		End of Year
Raw materials	$	8,500	$	10,500
Work in process	$	6,000	$	21,000
Finished goods	$	79,000	$	25,600

1) Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.

Mason Company
Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw materials inventory	$8,500
Add: Purchases of raw materials	140,000
Raw materials available for use	148,500
Less: Ending raw materials inventory	10,500
Raw materials used in production		$138,000
Direct labor		81,000
Manufacturing overhead		201,000
Total manufacturing costs		420,000
Add: Beginning work in process inventory		6,000
		426,000
Less: Ending work in process inventory		21,000
Cost of goods manufactured		$405,000

2.Prepare a schedule of cost of goods sold.

Mason Company
Schedule of Cost of Goods Sold
Beginning finished goods inventory	$79,000
Add: Cost of goods manufactured	405,000
Goods available for sale	484,000
Less: Ending finished goods inventory	25,600
Unadjusted cost of goods sold	458,400
Add: Underapplied overhead
Adjusted cost of goods sold	$458,400

3.Prepare an income statement.

Mason Company
Income Statement
Sales		$660,000
Cost of goods sold
Gross margin		660,000
Selling and administrative expenses:
Selling expenses	103,000
Administrative expense	43,000
		146,000
Net operating income		$514,000

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