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Exercise 18-12 In order for the animations in the presentation to work properly, be sure to view this presentation as a Slide Show.

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Presentation on theme: "Exercise 18-12 In order for the animations in the presentation to work properly, be sure to view this presentation as a Slide Show."— Presentation transcript:

1 Exercise In order for the animations in the presentation to work properly, be sure to view this presentation as a Slide Show.

2 A statement that summarizes the types and amounts of costs incurred in a company’s manufacturing process.

3 Using the Data for Exercise on page 765 of your text, we’ll create a Manufacturing Statement for Shanta Company.

4 Label this statement with the same three line heading used for all other formal accounting statements: Name of the company Name of the statement Period covered ShantaCompany Manufacturing Statement For Year Ended December 31, 2013

5 The best way to manage the preparation of this statement is to break it into four sections: Direct Materials Direct Labor Factory Overhead Cost of Goods Manufactured Note that the first three sections are the three components of a manufactured product. RandaCompany Manufacturing Statement ShantaCompany Manufacturing Statement For Year Ended December 31, 2013

6 The first section to complete is Direct Materials. Direct Materials Used is calculated as follows: Beginning Direct Materials Inv Plus: Raw Materials Purchased Less: Ending Raw Materials Inv You will always be given beginning and ending direct materials inventory and raw materials purchased. ShantaCompany Manufacturing Statement Direct Materials Beginning raw materials inventory$37,000 Raw materials purchases 175,600 Raw materials available for use212,600 Less ending raw materials inventory42,700 Direct materials used$169,900 For Year Ended December 31, 2013

7 The next section to complete is Direct Labor. Direct Labor will be entered as a single line item. ShantaCompany Manufacturing Statement For Year Ended December 31, 2013 Direct Materials Beginning raw materials inventory$37,000 Raw materials purchases 175,600 Raw materials available for use212,600 Less ending raw materials inventory42,700 Direct materials used$169, ,000 Direct Labor

8 The third section is Factory Overhead. For Factory Overhead, simply list each factory overhead component and total them. 225,000 Direct Labor RandaCompany Manufacturing Statement For Year Ended December 31, 2011 Direct Materials Beginning raw materials inventory$37,000 Raw materials purchases 175,600 Raw materials available for use212,600 Less ending raw materials inventory42,700 Direct materials used$169,900 Factory Overhead Factory Computer Supplies Used17,840 Indirect Labor47,000 Repairs – Factory equipment 5,250 Rent Cost of Factory Building57,000 Total factory overhead costs 127,090

9 The third section is Factory Overhead. For Factory Overhead, simply list each factory overhead component and total them. 225,000 Direct Labor ShantaCompany Manufacturing Statement For Year Ended December 31, 2013 Direct Materials Beginning raw materials inventory$37,000 Raw materials purchases 175,600 Raw materials available for use212,600 Less ending raw materials inventory42,700 Direct materials used$169,900 Factory Overhead Factory Computer Supplies Used17,840 Indirect Labor47,000 Repairs – Factory equipment 5,250 Rent Cost of Factory Building57,000 Total factory overhead costs 127,090

10 Once you have the three basic components listed, Direct Materials Direct Labor Factory Overhead total these to determine Total Manufacturing Costs. Total manufacturing costs 521, ,000 Direct Labor ShantaCompany Manufacturing Statement For Year Ended December 31, 2013 Direct Materials Beginning raw materials inventory$37,000 Raw materials purchases 175,600 Raw materials available for use212,600 Less ending raw materials inventory42,700 Direct materials used$169,900 Factory Overhead Factory Computer Supplies Used17,840 Indirect Labor47,000 Repairs – Factory equipment 5,250 Rent Cost of Factory Building57,000 Total factory overhead costs 127,090

11 Once you have the three basic components listed, Direct Materials Direct Labor Factory Overhead total these to determine Total Manufacturing Costs. 225,000 Direct Labor ShantaCompany Manufacturing Statement For Year Ended December 31, 2013 Direct Materials Beginning raw materials inventory$37,000 Raw materials purchases 175,600 Raw materials available for use212,600 Less ending raw materials inventory42,700 Direct materials used$169,900 Factory Overhead Factory Computer Supplies Used17,840 Indirect Labor47,000 Repairs – Factory equipment 5,250 Rent Cost of Factory Building57,000 Total factory overhead costs 127,090 Total manufacturing costs 521,990

12 At this point, it feels like you have completed the statement but you have not. You have currently determined the total manufacturing costs incurred this period. To determine the cost of [finished] goods manufactured, add beginning goods in process to goods manufactured and then deduct ending goods in process. 225,000 Direct Labor Direct materials used$171,900 ShantaCompany Manufacturing Statement For Year Ended December 31, 2013 $169,900 Direct Materials Beginning raw materials inventory$37,000 Raw materials purchases 175,600 Raw materials available for use212,600 Less ending raw materials inventory42,700 Total manufacturing costs533,990 Beginning goods in process inventory53,900 Total cost of goods in process575,890 Less ending goods in process inventory41,500 Cost of goods manufactured$534,390 Factory Overhead Factory Computer Supplies Used17,840 Indirect Labor47,000 Repairs – Factory equipment 5,250 Rent Cost of Factory Building57,000 Total factory overhead costs 127,090 Total manufacturing costs521,990

13 The Cost of [Finished] Goods Manufactured feeds into the Cost of Goods Sold reported on the income statement. Total manufacturing costs 521,090 Beginning goods in process inventory53,900 Total cost of goods in process575,890 Less ending goods in process inventory41,500 Cost of goods manufactured$534,390 ShantaCompany Manufacturing Statement For Year Ended December 31, 2013 COST OF GOODS SOLD Beginning finished goods inventory$62,750 Cost of goods manufactured534,390 Cost of goods available for sale597,140 Less ending finished goods inventory67,300 Cost of goods sold$529,840 Note the similarity between the calculation of Cost of Goods Sold on the income statement and the calculation of Direct Materials Used on the manufacturing statement.

14 Except for the calculation of Cost of Goods Sold as demonstrated on the previous slide, the income statement for a manufacturer is completed in the same manner used for merchandising companies. See page 739 of your textbook for a complete example of a manufacturing income statement.

15 Now you try preparing a Manufacturing Statement. Use the Data for Kabiro Company from Exercise on page 755 of your text. Check your answer on the next two screens.

16 Part 1 – Manufacturing Statement

17 Part 2 – Cost of Goods Sold

18 After completing this example you should feel more prepared to work Problem 18-7A in Connect. If you need more practice on this task, complete Problem 18-7B and check your answers against the B Problem Solutions linked on the Content menu.

19 End of Presentation


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