1. Cost & Management Accounting
Financial Statements
Lecture-4
Mian Ahmad Farhan (ACA)

2. Cost Of Goods Manufactured
Total factory Cost ,000
Add Opening Work in process inventory 30,000
Cost of goods to be manufactured ,000
Less Closing Work in process ,000
Cost of goods manufactured ,000
The goods which are in process in last year (Closing WIP) In
Next year treated as Opening WIP

3. Cost Of Goods Sold Cost of goods manufactured 210,000
Add Opening finished goods inventory 100,000
Cost of goods to be sold 310,000
Less Closing finish goods (10,000)
Cost of goods sold ,000
The goods which are completed but not yet sold (Closing Finish goods) In
Next year treated as Opening Finish goods

4. Income statement Sales 600,000 Less Cost of goods sold (300,000)
Gross profit ,000
Less Operating expenses
Selling and marketing 50,000
Distribution 30,000
Administrative 20,000
100,000
Operating profit (Financial Expenses) ,000
Less Interest expense ,000
Profit before tax ,000
Less Income Tax ,000
Net profit ,000

5. Total Factory Cost Based on Applied FOH Cost
Direct material Consumed
Add Direct labor
Prime Cost
FOH Applied (150% of Direct Labor Cost)
90,000
60,000
150,000
240,000

6. Cost Of Goods Sold statement For the year ended_______
Direct Material Consumed 90,000
Add Direct labor 60,000
Prime cost 150,000
Add FOH applied (150%of direct labor cost) 90,000
Total factory cost 240,000
Add Opening Work in process 30,000
Cost of good to be manufactured 270,000
Less Closing Work in process 50,000
Cost of good manufactured 220,000
Add Opening finish goods 100,000
Cost of good to be sold 320,000
Less closing finish goods 10,000
Cost of good to sold at normal 310,000

7. Cost Of Goods Sold statement For the year ended_______
Direct Material Consumed 90,000
Add Direct labor 60,000
Prime cost 150,000
Add FOH applied (150%of direct labor cost) 90,000
Total factory cost 240,000
Add Opening Work in process 30,000
Cost of good to be manufactured 270,000
Less Closing Work in process 50,000
Cost of good manufactured 220,000
Add Opening finish goods 100,000
Cost of good to be sold 320,000
Less closing finish goods 10,000
Cost of good to sold at normal 310,000

8. Under/Over applied FOH cost
Less Actual FOH Cost 80,000
Over applied FOH cost 10,000

9. Cost Of Goods Sold statement For the year ended_______
Direct Material Consumed 90,000
Add Direct labor 60,000
Prime cost 150,000
Add FOH applied (150%of direct labor cost) 90,000
Total factory cost 240,000
Add Opening Work in process 30,000
Cost of good to be manufactured 270,000
Less Closing Work in process 50,000
Cost of good manufactured 220,000
Add Opening finish goods 100,000
Cost of good to be sold 320,000
Less closing finish goods 10,000
Cost of good to sold at normal 310,000
Less over applied ,000
Cost of good to sold at actual 300,000

10. Adjustment of Under/Over applied FOH cost
Under/Over applied FOH cost can be adjusted in following costs/profit figures:
1. Entire Production
a) Work in process inventory
b) Finished goods inventory
c) Cost of goods sold
2. Cost of Goods Sold
3. Net profit

11. Income statement based on applied FOH cost
Sales ,000
Less Cost of goods sold at normal (310,000)
Gross profit ,000
Less Operating expenses
Selling and marketing 50,000
Distribution 30,000
Administrative 20,000
100,000
Operating profit (Financial Expenses) ,000
Less Interest expense ,000
Profit before tax ,000
Less Income Tax ,000
Net profit at normal ,000
Add Over applied FOH cost ,000
Net profit at actual ,000

12. Adjustment in: Entire Production
Work in process Cost 50, ,350 = 48,650
Finished goods Cost 10, = 9,730
Cost of goods sold 310, ,380 =301,620

13. Adjustment in: Entire Production
Work in process Cost 50, ,350 = 48,650
Finished goods Cost 10, = 9,730
Cost of goods sold 310, ,380 =301,620

14. Adjustment in: Entire Production
Work in process Cost 50, ,350 = 48,650
Finished goods Cost 10, = 9,730
Cost of goods sold 310, ,380 =301,620