{"id":92,"date":"2015-06-25T21:55:34","date_gmt":"2015-06-25T21:55:34","guid":{"rendered":"https:\/\/courses.candelalearning.com\/managacct2x10xmaster\/?post_type=chapter&p=92"},"modified":"2015-12-09T16:52:04","modified_gmt":"2015-12-09T16:52:04","slug":"the-statement-of-cost-of-goods-manufactured","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-managacct\/chapter\/the-statement-of-cost-of-goods-manufactured\/","title":{"raw":"1.6 The Statement of Cost of Goods Manufactured","rendered":"1.6 The Statement of Cost of Goods Manufactured"},"content":{"raw":"
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\r\n\r\nThe statement of cost of goods manufactured <\/strong>supports the cost of goods sold figure on the income statement.\u00a0 The two most important numbers on this statement are the total manufacturing cost and the cost of goods manufactured.<\/em> Be careful not to confuse the terms total manufacturing cost and cost of goods manufactured with each other or with the cost of goods sold.\r\n\r\nTotal Manufacturing Cost <\/strong>includes the costs of all resources put into production during the period (meaning, the direct materials, direct labor and overhead applied). Cost of goods manufactured <\/strong>consists of the cost of all goods completed during the period. It includes total manufacturing costs plus the beginning work in process inventory minus the ending work in process inventory. Cost of goods sold<\/strong> are the costs of all goods SOLD during the period and includes the cost of goods manufactured plus the beginning finished goods inventory minus the ending finished goods inventory.\u00a0 Cost of goods sold is reported as an expense on the income statements and is the only time product costs are expensed.\u00a0 This chart will summarize the formulas you will need:\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Direct Materials Used<\/strong><\/td>\r\nBeginning Raw Materials Inventory + Raw Material Purchases - Ending Raw Materials Inventory - Indirect Materials Used<\/td>\r\n<\/tr>\r\n
Total Manufacturing Cost<\/strong><\/td>\r\nDirect Materials + Direct Labor + Overhead applied<\/td>\r\n<\/tr>\r\n
Cost of Goods Manufactured<\/strong><\/td>\r\nTotal Manufacturing Cost (Direct Materials + Direct Labor + Overhead applied) + Beginning Work In Process Inventory - Ending Work in Process Inventory<\/td>\r\n<\/tr>\r\n
Cost of Goods Sold<\/strong><\/td>\r\nBeginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n \r\n\r\nhttps:\/\/youtu.be\/Ycezt5Hu06M\r\n
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\r\n\r\nNoteLook at the following example.\u00a0 Farside Manufacturing makes calendars and books.\u00a0 The schedule (or statement) of cost of goods manufactured follows:\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Farside Manufacturing Company<\/strong>\u00a0<\/strong>\u00a0<\/strong><\/td>\r\n<\/tr>\r\n
Statement of cost of goods manufactured\u00a0\u00a0<\/strong><\/td>\r\n<\/tr>\r\n
For the year ended December 31\u00a0\u00a0<\/strong><\/td>\r\n<\/tr>\r\n
Direct Materials Used:\r\n<\/em><\/td>\r\n<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Raw Materials inventory, January 1<\/td>\r\n$40,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Raw Materials purchases<\/td>\r\n480,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Less: Raw Materials inventory, December 31<\/td>\r\n30,000<\/span><\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Raw Materials used<\/td>\r\n$490,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
Less: Indirect Materials Used<\/td>\r\n$0<\/span><\/td>\r\n<\/td>\r\n<\/tr>\r\n
Direct Materials Used<\/td>\r\n<\/td>\r\n$490,000<\/td>\r\n<\/tr>\r\n
Direct labor<\/td>\r\n<\/td>\r\n380,000<\/td>\r\n<\/tr>\r\n
Manufacturing overhead:<\/em><\/td>\r\n<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Indirect labor<\/td>\r\n$120,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Maintenance and repairs expense<\/td>\r\n60,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Factory utilities expense<\/td>\r\n10,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Depreciation expense \u2013 factory building<\/td>\r\n20,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Depreciation expense \u2013 factory equipment<\/td>\r\n30,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Other expense \u2013 factory<\/td>\r\n20,000<\/span><\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0\u00a0\u00a0 Total manufacturing overhead<\/td>\r\n<\/td>\r\n260,000<\/span><\/td>\r\n<\/tr>\r\n
Total Manufacturing Cost<\/strong><\/td>\r\n\u00a0<\/strong><\/td>\r\n$1,130,000<\/strong><\/td>\r\n<\/tr>\r\n
\u00a0 Add: Work in process inventory, January 1<\/td>\r\n<\/td>\r\n30,000<\/td>\r\n<\/tr>\r\n
\u00a0 Less: Work in process inventory, December 31<\/td>\r\n<\/td>\r\n-60,000<\/span><\/td>\r\n<\/tr>\r\n
Cost of goods manufactured<\/strong><\/td>\r\n\u00a0<\/strong><\/td>\r\n$1,100,000<\/strong><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nNote how the statement shows the costs incurred for direct materials, direct labor, and manufacturing overhead. The statement totals these three costs for total manufacturing cost during the period. When adding beginning work in process inventory and deducting ending work in process inventory from the total manufacturing cost, we obtain cost of goods manufactured or completed. Cost of goods sold does not appear on the cost of goods manufactured statement but on the income statement.\r\n\r\nTo make the manufacturer\u2019s income statement more understandable to readers of the financial statements, accountants do not show all of the details that appear in the cost of goods manufactured statement. Next, we show the income statement for Farside Manufacturing Company. Notice the relationship of the statement of cost of goods manufactured to the income statement.\r\n\r\nThe cost of goods manufactured appears in the cost of goods sold section of the income statement. The cost of goods manufactured is in the same place that purchases would be presented on a merchandiser\u2019s income statement. We add cost of goods manufactured to beginning finished goods inventory to derive cost of goods available for sale. This is similar to the merchandiser who presents purchases added to beginning merchandise to derive goods available for sale.\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Farside Manufacturing Company<\/strong><\/td>\r\n<\/tr>\r\n
Income statement<\/strong><\/td>\r\n<\/tr>\r\n
For the year ended December 31<\/strong><\/td>\r\n<\/tr>\r\n
Sales<\/td>\r\n<\/td>\r\n$1,800,000<\/td>\r\n<\/tr>\r\n
Cost of goods sold:<\/td>\r\n<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Finished goods inventory, January 1<\/td>\r\n$50,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Cost of goods manufactured<\/strong><\/td>\r\n1,100,000<\/strong><\/span><\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Cost of goods available for sale<\/td>\r\n$1,150,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Less: Finished goods inventory, December 31<\/td>\r\n60,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Cost of goods sold<\/strong><\/td>\r\n<\/td>\r\n1,090,000<\/strong><\/span><\/td>\r\n<\/tr>\r\n
\u00a0 Gross margin (Sales - Cost of goods sold)<\/td>\r\n<\/td>\r\n$710,000<\/td>\r\n<\/tr>\r\n
Operating expenses:<\/td>\r\n<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Selling expenses<\/td>\r\n$300,000<\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Administrative expenses<\/td>\r\n200,000<\/span><\/td>\r\n<\/td>\r\n<\/tr>\r\n
\u00a0 Total operating expenses<\/td>\r\n<\/td>\r\n500,000<\/span><\/td>\r\n<\/tr>\r\n
\u00a0 Income from operations<\/td>\r\n<\/td>\r\n$210,000<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nNote: Cost of goods available for sale represents all items completed and read to sell during the period.\u00a0 It is calculated as beginning finished goods inventory + cost of goods manufactured from the statement of cost of goods manufactured.\u00a0 Income from operations is calculated as Gross Margin (also called Gross Profit) - total operating expenses.\r\n\r\n \r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>","rendered":"
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The statement of cost of goods manufactured <\/strong>supports the cost of goods sold figure on the income statement.\u00a0 The two most important numbers on this statement are the total manufacturing cost and the cost of goods manufactured.<\/em> Be careful not to confuse the terms total manufacturing cost and cost of goods manufactured with each other or with the cost of goods sold.<\/p>\n

Total Manufacturing Cost <\/strong>includes the costs of all resources put into production during the period (meaning, the direct materials, direct labor and overhead applied). Cost of goods manufactured <\/strong>consists of the cost of all goods completed during the period. It includes total manufacturing costs plus the beginning work in process inventory minus the ending work in process inventory. Cost of goods sold<\/strong> are the costs of all goods SOLD during the period and includes the cost of goods manufactured plus the beginning finished goods inventory minus the ending finished goods inventory.\u00a0 Cost of goods sold is reported as an expense on the income statements and is the only time product costs are expensed.\u00a0 This chart will summarize the formulas you will need:<\/p>\n\n\n\n\n\n\n
Direct Materials Used<\/strong><\/td>\nBeginning Raw Materials Inventory + Raw Material Purchases – Ending Raw Materials Inventory – Indirect Materials Used<\/td>\n<\/tr>\n
Total Manufacturing Cost<\/strong><\/td>\nDirect Materials + Direct Labor + Overhead applied<\/td>\n<\/tr>\n
Cost of Goods Manufactured<\/strong><\/td>\nTotal Manufacturing Cost (Direct Materials + Direct Labor + Overhead applied) + Beginning Work In Process Inventory – Ending Work in Process Inventory<\/td>\n<\/tr>\n
Cost of Goods Sold<\/strong><\/td>\nBeginning Finished Goods Inventory + Cost of Goods Manufactured – Ending Finished Goods Inventory<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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