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Chapter 16: Q17RQ (page 885)

How does a manufacturing company calculate cost of goods sold? How is this different from a merchandising company?

Short Answer

Expert verified

The cost of goods sold of manufacturing company is calculated by Beginning Finished goods inventory plus cost of goods manufactured less ending finished goods inventory and in merchandising company Beginning merchandise inventory plus purchases and freight in less ending merchandise inventory.

Step by step solution

01

Step-by-Step SolutionStep 1: Calculation of cost of goods sold in manufacturing company

In a manufacturing company, the activities in the finished goods inventory provides information about the COGS. Cost of goods sold is calculated with the formula which is Beginning Finished goods inventory plus cost of goods manufactured less ending finished goods inventory.

02

Difference in calculation of cost of goods sold for merchandising company

For a merchandising company, cost of goods sold is calculated by using the formulae Beginning merchandise inventory plus purchases and freight in less ending merchandise inventory. In merchandising company, the activity in the merchandise inventory account provides the information for determining COGS.

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Most popular questions from this chapter

Preparing a schedule of cost of goods manufactured Wilson Corp., a lamp manufacturer, provided the following information for the year ended December 31, 2018:

Balances: Beginning Ending

Direct Materials \( 59,000 \) 23,000

Work-in-Process Inventory 109,000 62,000

Finished Goods Inventory 41,000 44,000

Other information:

Depreciation, plant building and equipment $ 16,000

Direct materials purchases 151,000

Insurance on plant 24,000

Sales salaries 47,000

Repairs and maintenance—plant 10,000

Indirect labor 39,000

Direct labor 121,000

Administrative expenses 60,000

Requirements 2. What is the unit product cost if Wilson manufactured 3,700 lamps for the year?

Comparing managerial accounting and financial accounting

For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):

e. Reports audited annually by independent certified public accountants

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.

7. Wages of the office receptionist in an administrative office

Explain the differences between planning, directing, and controlling.

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
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