How to prepare a schedule of cost of goods sold

Accounting -V

FINANCIAL ACCOUNTING 13

Title: FINANCIAL ACCOUNTING

Student’s Name:

Institution:

Exercise 3-23

For each of the following companies, indicate whether job order or process costing is more appropriate

Manufacturer of swimming pool chemicals

Process costing

Manufacturer of custom hot tubs and spas

Job posting

Architectural firm

Job posting

Manufacturer of ceramic tile

Process costing

Producer of yogurt

Process costing

Manufacturer of custom tool sheds

Job posting

Manufacturer of papers clips

Process costing

Engineering consulting firm

Job posting

Manufacturer of balloons

Process costing

Manufacturer of custom emergency rescue vehicles

Process costing

Exercise 3-27

Prime cost= direct labor cost + direct material cost

Total manufacturing cost= Prime cost+ Manufacturing overhead cost

Cost of goods manufactured= Total manufacturing cost + Beginning WIP Inventory- Ending WIP Inventory

Cost of goods sold= Cost of goods manufactured + Beginning Finished Goods Inventory- Ending Finished Goods Inventory

Direct materials used for manufacturing of finished goods

Raw materials inventory, January 1

$133,000

Add: Raw Materials purchase during January

$190,000

Total raw materials inventory available for consumption

$323,000

Less: Raw materials inventory, January 31

$124,000

Raw materials used or consumed during January

$199,000

The prime cost, total manufacturing cost, the cost of goods manufactured for January

Direct raw materials cost (working Note 1)

$199,000

Direct labor Cost

$300,000

Prime cost for January

$499,000

Applied manufactured overhead (60% of direct labor cost)

$180,000

Total manufacturing costs for January

$679,000

Add: Work in process inventory, January 1

$233,000

Less: Work in process inventory, January 31

$251,000

Cost of goods manufactured for January

$661,000

Cost of goods sold for January

Finished goods inventory, January 1

$125,000

Add: Cost of goods manufactured for January

$661,000

Total cost of goods available for sale

$786,000

Less: Finished goods inventory, January 31

$117,000

Cost of goods sold for January

$669,000

The balance in the manufacturing overhead account on January 31

Applied manufacturing overhead cost= 60% of the direct labor cost= 60% × $300,000= $180,000 (Credit)

Actual manufacturing overhead cost= $170,000 (Debit)

Balance in the manufacturing overhead account on January 31= $10,000 (Credit)

Problem 3-42

1. Prepare Twisto Pretzel Company’s schedule of cost of goods manufactured for 20×1.

2. Prepare the company’s schedule of cost of goods sold for 20×1. The company closes overapplied or underapplied overhead into cost of goods sold.

3. Prepare the company’s income statement for 20×1.

Twisto Pretzel Company

Schedule of cost of Goods Manufactured

For the year of 20×1

Particulars

Amount $

Amount $

Direct Materials:

Raw material inventory on 31.12. ×0

10,100

Add: Purchase of raw material

39,000

Raw material available for use

49,100

Deduct: Raw material inventory 31.12. ×1

11,000

Raw material used

38,100

Direct labour

79,000

Manufacturing overhead:

Insurance on factory and equipment

3,600

Indirect material used

4,900

Depreciation on factory equipment

2,100

Property taxes of factory

2,400

Utilities for factory

6,000

Indirect labor

29,000

Depreciation on factory building

3,800

Rental for warehouse to store raw material

3,100

Total actual manufacturing overhead

54,900

Add: over applied overhead

3,100

Overheads applied to work in process

58,000

Total manufacturing

175,000

Add: Work in process inventory on 31.12. ×0

8,100

Subtotal

183,200

Deduct: work in process inventory on 31.12. ×1

8,300

Cost of goods manufactured

174,900

Twisto Pretzel Company

Schedule of cost of goods sold

For the year 20×1

Particulars

Amounts $

Finished goods inventory on 31.12. ×0

14,000

Add: cost of goods manufactured

174,000

Costs of goods available for sale

188,900

Deduct: finished goods inventory on 31.12. ×1

15,400

Cost of goods sold

173,500

Deduct: Over applied manufacturing overhead

3,100

Cost of goods sold(adjust for overapplied overhead)

170,400

Twisto Pretzel Company

Income statement

For the year ended December 31, 20×1

Particulars

Amount $

Amount $

Sales revenue

205,800

Deduct: cost of goods sold

170,400

Gross Margin

35,400

Deduct: Selling and administrative overheads

Selling and administrative overheads

13,800

Utilities for selling and administrative offices

2,500

Other selling and administrative expenses

4,000

Depreciation on card used by sales personnel

1,200

Rental of space for company president’s office

1,700

23,200

Income before taxes

12,200

Deduct: income tax expenses

5,100

Net Income

7,100

Problem 3-50

1. Prepare Huron’s schedule of cost of goods manufacturing for 20×2.

2. Prepare the company’s schedule of cost of goods sold for 20×2. The company closes overapplied or underapplied overhead into cost of goods sold.

3. Prepare the company’s income statement for 20×2.

Huron Corporation

Schedule of cost of goods manufactured

For the year ended December 31,20×2

Particulars

Amount $

Amounts $

Direct material

Raw material inventory, January 1

89,000

Add: Purchase of raw material

731,000

Raw material available

820,000

Less: raw material inventory, December 31

59,000

Raw material used

761,000

Direct labor

474,000

Manufacturing overhead:

Indirect material

45,000

Indirect labor

150,000

Depreciation of factory building

125,000

Depreciation on factory equipment

60,000

Insurance of factory equipment

40,000

Utilities for factory

70,000

Property taxes on factory

90,000

Total manufacturing overhead

580,000

Less: under applied manufacturing overhead

($580,000-$577,500)

2,500

Total manufacturing costs

1,812,500

Add: work in progress inventory, January 1

0

Less: work in progress inventory, December

40,000

Cost of goods manufactured

1,772,500

Huron Corporation

Schedule of cost goods sold

For the year ended December 31, 20×2

Particular

Amounts

Finished goods inventory, January 1

35,000

Add: cost of goods manufactured

1,772,500

Cost of goods available for sale

1,807,500

Less: finished goods inventory, December 31

40,000

Cost of goods sold

1,767,500

Add: under applied manufacturing overhead

($580,000-$577,500)

2,500

Cost of goods sold (adjusted for under applied overhead)

1,770,000

Huron Corporation

Income statement

For the year ended December 31, 20×2

Particulars

Amounts $

sales revenue

2,105,000

Less: cost of goods sold

1,770,000

Gross margin

335,000

Selling and administrative expenses

269,000

Income before taxes

66,000

Income tax Expense

25,000

Net income

41,000

Huron Corporation

Schedule of cost of goods manufactured

For the year ended December 31,20×2

Particulars

Amount $

Amounts $

Direct material

Raw material inventory, January 1

89,000

Add: Purchase of raw material

731,000

Raw material available

820,000

Less: raw material inventory, December 31

59,000

Raw material used

761,000

Direct labor

474,000

Manufacturing overhead:

Indirect material

45,000

Indirect labor

150,000

Depreciation of factory building

125,000

Depreciation on factory equipment

60,000

Insurance of factory equipment

40,000

Utilities for factory

78,000

Property taxes on factory

90,000

Total manufacturing overhead

588,000

Less: under applied manufacturing overhead

($588,000-$580,000)

8,000

Total manufacturing costs

1,815,000

Add: work in progress inventory, January 1

0

Less: work in progress inventory, December

40,000

Cost of goods manufactured

1,775,000

Huron Corporation

Schedule of cost goods sold

For the year ended December 31, 20×2

Particular

Amounts

Finished goods inventory, January 1

35,000

Add: cost of goods manufactured

1,775,000

Cost of goods available for sale

1,810,000

Less: finished goods inventory, December 31

40,000

Cost of goods sold

1,770,000

Add: under applied manufacturing overhead

($580,000-$577,500)

8,000

Cost of goods sold (adjusted for under applied overhead)

1,762,000

Huron Corporation

Income statement

For the year ended December 31, 20×2

Particulars

Amounts $

sales revenue

2,115,000

Less: cost of goods sold

1,762,000

Gross margin

353,000

Selling and administrative expenses

269,000

Income before taxes

84,000

Income tax Expense

25,000

Net income

59,000

References

Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.

Libby, R. (2017). Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.