Product Costing – Completing and Selling Products Chapter 32 Managerial Accounting Product Costing – Completing and Selling Products Prepared by Diane Tanner University of North Florida Copyright ©2015. University of North Florida. All rights reserved.

Completing Products The cost of completed products is transferred out of Work in Process Inventory DR Finished Goods Increase CR Work in Process Decrease The cost transferred out is called Cost of Goods Manufactured

Selling Products Revenue phase—the ‘sale’ is recognized for the amount of the selling price DR Cash or Accounts Receivable Increase CR Sales Revenue Expense phase—the ‘cost’ of the sale is recognized for the cost of the products sold DR Cost of Goods Sold CR Finished Goods Decrease

Cost Flow Walk Through Problem Arco provided the following from its June accounting records: Direct materials used in production $34,000 Indirect materials used in production Ending Finished Goods Inventory Raw materials purchased 1,000 18,000 32,000 Beginning Raw Materials Inventory 7,000 Beginning Work in Process Inventory 12,000 Beginning Finished Goods Inventory 15,000 Direct labor incurred 78,000 Manufacturing overhead incurred 65,000 Manufacturing overhead applied 63,000 Cost of goods manufactured 176,000 Calculate ending Raw Materials Inventory. Raw Materials Inventory Beginning 7,000 Purchases 32,000 34,000 DM used 1,000 IM used Ending 4,000

Cost Flow Walk Through Problem con’t Arco provided the following from its June accounting records: Direct materials used in production $34,000 Indirect materials used in production Ending Finished Goods Inventory Raw materials purchased 1,000 18,000 32,000 Beginning Raw Materials Inventory 7,000 Beginning Work in Process Inventory 12,000 Beginning Finished Goods Inventory 15,000 Direct labor incurred 78,000 Manufacturing overhead incurred 65,000 Manufacturing overhead applied 63,000 Cost of goods manufactured 176,000 Calculate ending Work In Process Inventory. Work in Process Inventory Beginning 12,000 DM used 34,000 DL incurred 78,000 176,000 CGM MOH applied 63,000 Ending 11,000

Cost Flow Walk Through Problem con’t Arco provided the following from its June accounting records: Direct materials used in production $34,000 Indirect materials used in production Ending Finished Goods Inventory Raw materials purchased 1,000 18,000 32,000 Beginning Raw Materials Inventory 7,000 Beginning Work in Process Inventory 12,000 Beginning Finished Goods Inventory 15,000 Direct labor incurred 78,000 Manufacturing overhead incurred 65,000 Manufacturing overhead applied 63,000 Cost of goods manufactured 176,000 Calculate Cost of Goods Sold prior to adjustment for over or underapplied overhead. Finished Goods Inventory Beginning 15,000 CGM 176,000 173,000 CGS Ending 18,000

Cost Flow Walk Through Problem con’t Arco provided the following from its June accounting records: Direct materials used in production $34,000 Indirect materials used in production Ending Finished Goods Inventory Raw materials purchased 1,000 18,000 32,000 Beginning Raw Materials Inventory 7,000 Beginning Work in Process Inventory 12,000 Beginning Finished Goods Inventory 15,000 Direct labor incurred 78,000 Manufacturing overhead incurred 65,000 Manufacturing overhead applied 63,000 Cost of goods manufactured 176,000 Calculate Cost of Goods Sold after adjustment for over or underapplied overhead. Manufacturing Overhead Cost of Goods Sold From FG 173,000 Actual 65,000 63,000 Applied Adjustment 2,000 Underapplied 2,000 Ending 175,000

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