1. Cost of Goods Reporting Managerial Accounting Prepared by Diane Tanner University of North Florida Chapter 33

2. Flow of Costs Beginning Work in Process + Total manufacturing costs incurred this period – Ending Work in Process = Cost of Goods Manufactured Cost of Goods Manufactured Beginning WIP Ending WIP Beginning WIP Ending WIP Manufacturing Overhead Direct Labor Direct Materials Cost of Products Completed Finished Goods

3. Cost of Goods Manufactured Statement 3 Obtained from the activity in the raw materials account

4. Product Costs on the Income Statement Income Statement Sales Revenue………………. $ xx Cost of Goods Sold………….. xx Matching concept applied Finished Goods Finished Goods Cost of Goods Sold Cost of Goods Sold Balance Sheet Income Statement

5. Cost of Goods Sold Comparison Beginning finished goods + Cost of goods manufactured +/- Under (over)applied MOH – Ending finished goods = Cost of goods sold Beginning merchandise inventory + Purchases - Ending merchandise inventory = Cost of goods sold Three items that differ: 1.Underapplied MOH is added; overapplied MOH is subtracted 2.Finished goods inventory vs. merchandise inventory 3.Cost of goods manufactured vs. purchases Three items that differ: 1.Underapplied MOH is added; overapplied MOH is subtracted 2.Finished goods inventory vs. merchandise inventory 3.Cost of goods manufactured vs. purchases

6. Product Costs on Balance Sheet Until sold, inventoriable costs are carried in one of three inventory accounts on the balance sheet. Balance Sheet Inventories: Raw Materials………….$xx Work in Process………. xx Finished Goods……….. xx Product Costs Product Costs

7. Reporting Inventories Example Finished goods inventory, ending$11,600 Finished goods inventory, beginning12,300 Indirect materials issued production3,200 General administrative expenses9,400 Raw materials inventory, ending4,500 Raw materials inventory, beginning5,100 7 Peters, Inc. manufactures homework machines. Income taxes are assessed at 30%. Overhead is applied based on direct labor cost. During 2018, Peters' transactions and accounts included: Direct materials Beginning RM inventory $ 5,100 Add net purchases 178,000 Less indirect materials (3,200) Less ending RM inventory 4,500 Direct materials used $184,400 Direct labor incurred 72,400 Manuf. overhead applied 56,100 Total manufacuturing costs 312,900 Add beginning WIP inventory 10,500 Less ending WIP inventory (12,800) Cost of goods manufactured $310,600 Sales424,000 Direct labor cost72,400 Direct materials purchased178,000 Work in process, ending12,800 Work in process, beginning10,500 Total overhead applied56,100 Data Cost of Goods Manufactured Statement

8. 8 The End