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Chapter 16: Q21E (page 892)

Computing cost of goods manufactured and cost of goods sold

Use the following information for a manufacturer to compute cost of goods manufactured and cost of goods sold:

Balances: Beginning Ending

Direct Materials \( 27,000 \) 28,000

Work-in-Process Inventory 40,000 32,000

Finished Goods Inventory 18,000 25,000

Other information:

Purchases of direct materials $ 73,000

Direct labor 88,000

Manufacturing overhead 43,000

Short Answer

Expert verified

The cost of goods manufactured is $211,000 and the cost of goods sold is $204,000.

Step by step solution

01

Step-by-Step SolutionStep 1 : Computation of cost of goods manufactured

Schedule of cost of goods manufactured

Amount ($)

Direct materials beginning

$27,000

Add: Purchases

$73,000

$100,000

Less: Ending Direct Materials

$28,000

Raw Material Used

$72,000

Direct Labor

$88,000

Manufacturing Overhead

$43,000

Total manufacturing costs incurred during the year

$203,000

Add: Opening WIP

$40,000

$243,000

Less: Ending WIP

$32,000

Cost of goods manufactured

$211,000

02

 Computation of Cost of goods sold


Schedule of cost of goods sold

Amount ($)

Cost of goods manufactured

$211,000

Add: Opening finished goods

$18,000

$229,000

Less: Ending finished goods

$25,000

Cost of goods sold

$204,000

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Most popular questions from this chapter

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.

11.Salary of the sales manager

Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company

Chewy Bones manufactures its own brand of pet chew bones. At the end of December 2018, the accounting records showed the following:

Balances: Beginning Ending

Direct Materials \( 13,400 \) 10,500

Work-in-Process Inventory 0 1,500

Finished Goods Inventory 0 5,400

Other information:

Direct materials purchases $ 39,000

Plant janitorial services 900

Sales salaries 5,100

Delivery costs 1,700

Net sales revenue 115,000

Utilities for plant 1,200

Rent on plant 9,000

Customer service hotline costs 1,600

Direct labor 16,000

Requirements

1. Prepare a schedule of cost of goods manufactured for Chewy Bones for the year ended December 31, 2018.

2. Prepare an income statement for Chewy Bones for the year ended December 31, 2018.

3. How does the format of the income statement for Chewy Bones differ from the income statement of a merchandiser?

4. Chewy Bones manufactured 17,500 units of its product in 2018. Compute the company’s unit product cost for the year, rounded to the nearest cent.

Understanding today’s business environment

Match the following terms to the appropriate statement. Some terms may be used more than once, and some terms may not be used at all.

E-commerce Just-in-time management (JIT)

Enterprise resource planning (ERP) Total quality management (TQM)

a. A management system that focuses on maintaining lean inventories while producing products as needed by the customer.

b. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services while meeting organizational objectives.

c. Integrates all of a company’s functions, departments, and data into a single system.

d. Adopted by firms to conduct business on the Internet

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA): 1. Helps creditors make lending decisions

Question:Calculating cost of goods sold for merchandising and manufacturing companies

Below are data for two companies:

Company A Company B

Beginning balances:

Merchandise Inventory \( 10,600

Finished Goods Inventory \) 15,000

Ending balances:

Merchandise Inventory 13,100

Finished Goods Inventory 11,700

Net Purchases 154,500

Cost of Goods Manufactured 214,500

Requirements

1. Define the three business types: service, merchandising, and manufacturing.

2. Based on the data given for the two companies, determine the business type of each one.

3. Calculate the cost of goods sold for each company
See all solutions

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