Reporting Product Costs Chapter 33 Managerial Accounting Reporting Product Costs Prepared by Diane Tanner University of North Florida Copyright ©2015. University of North Florida. All rights reserved.

Flow of Costs Beginning Work in Process + Total manufacturing costs incurred this period – Ending Work in Process = Cost of Goods Manufactured Cost of Goods Manufactured Beginning WIP Ending WIP Manufacturing Overhead Direct Labor Direct Materials Cost of Products Completed Finished Goods

Cost of Goods Manufactured Statement Direct materials used:    Beginning raw materials inventory    + Raw materials purchases    ─ Indirect materials issued to production    ─ Ending raw materials inventory = Direct materials used + Direct labor + Manufacturing overhead = Total manufacturing costs + Beginning work in process inventory ─ Ending work in process inventory = Cost of goods manufactured Obtained from the activity in the raw materials account

Product Costs on the Income Statement Sales Revenue………………. $ xx Cost of Goods Sold………….. xx Matching concept applied Finished Goods Cost of Goods Sold Balance Sheet Income Statement

Cost of Goods Sold Comparison Manufacturing Merchandising Beginning finished goods + Cost of goods manufactured +/- Under (over)applied MOH – Ending finished goods = Cost of goods sold Beginning merchandise inventory + Purchases Ending merchandise inventory = Cost of goods sold Three items that differ: Underapplied MOH is added; overapplied MOH is subtracted Finished goods inventory vs. merchandise inventory Cost of goods manufactured vs. purchases

Product Costs on Balance Sheet Inventories: Raw Materials………….$xx Work in Process………. xx Finished Goods……….. xx Product Costs Until sold, inventoriable costs are carried in one of three inventory accounts on the balance sheet.

Reporting Inventories Example Peters, Inc. manufactures homework machines. Income taxes are assessed at 30%. Overhead is applied based on direct labor cost. During 2018, Peters' transactions and accounts included: Data Finished goods inventory, ending $11,600 Finished goods inventory, beginning 12,300 Indirect materials issued production 3,200 General administrative expenses 9,400 Raw materials inventory, ending 4,500 Raw materials inventory, beginning 5,100 Cost of Goods Manufactured Statement Direct materials Beginning RM inventory $ 5,100 Add net purchases 178,000 Less indirect materials (3,200) Less ending RM inventory 4,500 Direct materials used $184,400 Direct labor incurred 72,400 Manuf. overhead applied 56,100 Total manufacuturing costs 312,900 Add beginning WIP inventory 10,500 Less ending WIP inventory (12,800) Cost of goods manufactured $310,600 Sales 424,000 Direct labor cost 72,400 Direct materials purchased 178,000 Work in process, ending 12,800 Work in process, beginning 10,500 Total overhead applied 56,100

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