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Chapter 16: 16RQ (page 885)

How is cost of goods manufactured calculated?

Short Answer

Expert verified

The cost of goods manufactured in three steps first direct material used is calculated, second total manufacturing costs incurred, and then the cost of goods manufactured is calculated.

Step by step solution

01

Definition of cost of goods manufactured

The cost of goods manufactured is defined as the manufacturing costs of the goods that finished the production process during a given accounting period.

02

Calculation of cost of goods manufactured

The cost of goods manufactured in three steps which are as follows:

Step 1: Calculation of direct material used.

Step 2: Calculation of total manufacturing costs incurred during the year.

Step 3: Calculation of cost of goods manufactured.

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Most popular questions from this chapter

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

a. Salaries of scientists studying ways to speed forest growth.

How does a service company calculate unit cost per service?

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.

9. Sugar and flour used to make cookies

Preparing an income statement and calculating unit cost for a merchandising company

Clyde Conway owns Clyde’s Pets, a small retail shop selling pet supplies. On December 31, 2018, the accounting records of Clyde’s Pets showed the following:

Merchandise Inventory on December 31, 2018 $ 10,100

Merchandise Inventory on January 1, 2018 15,900

Net Sales Revenue 56,000

Utilities Expense for the shop 3,300

Rent for the shop 4,100

Sales Commissions 2,650

Purchases of Merchandise Inventory 25,000

Requirements

1. Prepare an income statement for Clyde’s Pets for the year ended December 31, 2018.

2. Clyde’s Pets sold 3,850 units. Determine the unit cost of the merchandise sold, rounded to the nearest cent

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

5. Summary reports prepared quarterly or annually.
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