1. 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.

2. 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

3. 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

4. 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

5. 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

6. 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.

7. 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

8. The End