M.

Naveed Alam 1
 COST OF GOODS SOLD
Direct Materials, beginning inventory
+ Direct Materials Purchases
– Direct Materials, ending inventory
Direct Materials Used in Production

Direct Materials Used in Production

+ Direct Labor
+ Manufacturing Overhead
Total Product Cost

Total Product Cost

+ Work in Process, beginning inventory
– Work in Process, ending inventory
Cost of Goods Manufactured

Cost of Goods Manufactured

+ Finished Goods, beginning inventory
Goods Available for Sale Hand-out
– Finished Goods, ending inventory
Cost of Goods Sold
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Cost of Goods Sold
Statement
Example

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Quick Check 
Beginning raw materials inventory was $32,000. During the
month, $276,000 of raw material was purchased. Account
at the end of the month revealed that $28,000 of raw
material was still present. What is the cost of direct
material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2,000

M. Naveed Alam 4
Quick Check 
Beginning raw materials inventory was $32,000. During the
month, $276,000 of raw material was purchased. A count
at the end of the month revealed that $28,000 of raw
material was still present. What is the cost of direct
material used? Beg. raw materials $ 32,000
A. $276,000 + Raw materials
purchased 276,000
B. $272,000 = Raw materials available
for use in production $ 308,000
C. $280,000 – Ending raw materials
inventory 28,000
D. $ 2,000
= Raw materials used
in production $ 280,000

M. Naveed Alam 5
Quick Check 
Direct materials used in production totaled
$280,000. Direct labor was $375,000 and factory
overhead was $180,000. What were total
manufacturing costs incurred for the month?
A. $555,000
B. $835,000
C. $655,000
D. Cannot be determined.

M. Naveed Alam 6
 Direct Materials $ 280,000
+ Direct Labor 375,000
Quick Check  + Mfg. Overhead
= Mfg. Costs Incurred
180,000

for the Month $ 835,000

Direct materials used in production totaled

$280,000. Direct labor was $375,000 and factory
overhead was $180,000. What were total
manufacturing costs incurred for the month?
A. $555,000
B. $835,000
C. $655,000
D. Cannot be determined.

M. Naveed Alam 7
Quick Check 
Beginning work in process was $125,000.
Manufacturing costs incurred for the month
were $835,000. There were $200,000 of partially
finished goods remaining in work in process
inventory at the end of the month. What was
the cost of goods manufactured during the
month?
A. $1,160,000
B. $ 910,000
C. $ 760,000
D. Cannot be determined.
M. Naveed Alam 8
 Beginning work in
process inventory $ 125,000
+ Mfg. costs incurred
for the period 835,000
= Total work in process

Quick Check  –
during the period
Ending work in
process inventory
$ 960,000

200,000
= Cost of goods
manufactured $ 760,000

Beginning work in process was $125,000.

Manufacturing costs incurred for the month
were $835,000. There were $200,000 of partially
finished goods remaining in work in process
inventory at the end of the month. What was
the cost of goods manufactured during the
month?
A. $1,160,000
B. $ 910,000
C. $ 760,000
D. Cannot be determined.
M. Naveed Alam 9
Quick Check 
Beginning finished goods inventory was $130,000.
The cost of goods manufactured for the month
was $760,000. And the ending finished goods
inventory was $150,000. What was the cost of
goods sold for the month?
A. $ 20,000.
B. $740,000.
C. $780,000.
D. $760,000.

M. Naveed Alam 10
Quick Check 
Beginning finished goods inventory was $130,000.
The cost of goods manufactured for the month
was $760,000. And the ending finished goods
inventory was $150,000. What was the cost of
goods sold for the month?
A. $ 20,000.
$130,000 + $760,000 = $890,000
B. $740,000. $890,000 - $150,000 = $740,000
C. $780,000.
D. $760,000.

M. Naveed Alam 11
 COGS Statement?
The following data is available for ABC Manufacturing Company. For the year ended
Dec 31, 2009

Raw Material purchased Rs 1’946,700

Direct Labor Cost Rs 2’125,800
Factory Overhead Rs 764,000

Inventory Balance: Opening Bal Closing Bal

Raw Material Rs 268,000 Rs 167,000
W.I.P Rs 150,000 Rs 150,000
Finished Goods Rs 43,000 Rs 79,000

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M. Naveed Alam 13
 Income Statement ?
The following data is available for ABC Manufacturing Company. For the year ended
Dec 31, 2009

Raw Material purchased Rs 1’946,700

Direct Labor Cost Rs 2’125,800
Factory Overhead Rs 764,000
Marketing Expenses Rs 516,000
General and Administration Expenses Rs 461,000
Sales (12,400 Units) Rs 6’634,000

Inventory Balance: Opening Bal Closing Bal

Raw Material Rs 268,000 Rs 167,000
W.I.P Rs 150,000 Rs 150,000
Finished Goods Rs 43,000 Rs 79,000
Finished Goods (Refrigerator) 100 Units 200 Units

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Q#4 Income & Cost of Good Sold Statement
 Direct labor Cost & $ 30,000
 Cost Of Goods Sold $ 111,000
 Factory over head 150% of Direct Labor Cost
 Inventory Balance: Opening Bal Closing Bal

 Finished Goods 15,000 17,500

 Work in Process 9,600 13,000
 Material 7,000 7,400
 Other Data:
 Marketing Expense 14,100
 General & Admin Exp 22,900
 Sales For the period 182,000

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Q#7 Cost of Good Sold Statement
 Direct Material Used $ 193,000
 Cost Of Goods available for sales $ 684,000
 Total Manufacturing Cost $584,000
 Factory Over Head $167,000
 Inventory Balance: Opening Bal Closing Bal

 Finished Goods $110,000 $95,000

 Work in Process 70,000 80,000
 Material 90,000 95,000

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M. Naveed Alam 17
 “Material”
1-Purchase raw material on account.
Material ……………………………………………….. XXX
Account Payable………………………..……………….……. XXX

2-Transportation in /Freight in / Carriage in Paid on Purchase of Material.

Transportation in / F.OH…........................................ XXX
Cash ……………………………..………. XXX

3-Defective, damage or Inferior Quality returned to vendor or supplier of

material.
Account Payable……………………………..……… XXX
Material ………….…………..…………… XXX

4-issuance / Re-position of Material for Production (Direct / Indirect)

Work in Process (Direct Material)………………….. XXX
Factory Overhead (Indirect Material)…………….. XXX
Material………………………………………..…..…… XXX

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 “Material”

5-Un-Used Material returned to storeroom (Direct / Indirect)

Material…………………………………………..…… XXX
Work in Process (Direct Material)………………….. XXX
Factory Overhead (Indirect Material)…………….. XXX

6-Discount Received from Vendor

Account Payable……………………………..……… XXX
Purchase Discount ……….…….…………………… XXX

7-Rebate or allowance
Account Payable……………………………..……… XXX
Purchase Discount ……….…….…………………… XXX

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1-Recording of payroll.
“labour”
Payroll …………………………………………. XXX
Employee Income Tax payable …………………..………. XXX
Provident Fund …Or FICA………………..……….……. XXX
Accrued Payroll ………………………..………..…. XXX
2-Payment Of Payroll.
Accrued Payroll …....................................... …………. XXX
Cash ………………………………………………………. XXX

3-Distribution of Payroll.
Work in Process ……………………………..……… XXX
Factory Overhead …………………………..……… XXX
Administrative Exp ………………………..……… XXX
Marketing Exp ……………………………..……… XXX
Payroll………….………………………………………… XXX

Factory Overhead …………………………..……… XXX

Administrative Exp ………………………..……… XXX
Marketing Exp ……………………………..……… XXX
Provident Fund Cont Employer Or FICA ……………….… XXX
State Unemployment Tax ………………. ……….… XXX
Federal Unemployment tax ………………. ……….… XXX
4-Payment of Tax .
Income Tax Payable …..................................................XXX
Cash ………………………………………….…….……. XXX

M. Naveed Alam 20
Labour Example
Direct Labour Rs 40,000
Indirect labour Rs 15,000
Office Staff Salary Rs 20,000
Marketing Staff Salary Rs 25,000
Rs 100,000

Other Information
 Tax @ 10%
 FICA 8%

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1-Recording of payroll.
“labour”
Payroll ……………………………………………….. 100,000
Employee Income Tax payable ……………..………. 10,000
Provident Fund Or FICA……………………..….……. 8,000
Accrued Payroll ………………………..………..…. 82,000

2-Payment Of Payroll.
Accrued Payroll …....................................................... 82,000
Cash …………………………………. 82,000

3-Distribution of Payroll.
Work in Process ……………………………..……… 40,000
Factory Overhead …………………………..……… 15,000
Administrative Exp ………………………..……… 20,000
Marketing Exp ……………………………..……… 25,000
Payroll………….…………………… 100,000

Factory Overhead ……………………..……… 4,400

Administrative Exp …………………..……… 1,600
Marketing Exp ……………………..……… 2,000
Provident Fund Cont Employer …Or FICA………….…8,000

M. Naveed Alam 22
 “labour”
4-Provident fund investment .
Provident Fund Cost (Employer) ….................................... 8,000
Provident Fund Cost (Employee) ….................................... 8,000
Cash ……………………………………………….……. 16,000

5-Payment of Tax .
Income Tax Payable …....................................................... 10,000
Cash ………………………………………….…….……. 10,000

M. Naveed Alam 23
 “FOH”
1-Annual Deprecation .
F.OH Actual ................................................................................... XXX
Accumulated Deprecation on Machinery ………………..……….………. XXX

2-Insurance Expired.
F.OH –Actual ….............................................................................. XXX
Prepaid Insurance ………………………. ……………….…………………. XXX
3-Power, Gas Electricity .
F.OH –Actual ….............................................................................. XXX
Cash ………………………………………………..………….…. …………XXX

4-Accrued Exp .
F.OH –Actual .................................................................................. XXX
Accrued Exp (P/A)…..………………………………………..…….……. XXX

5-Indrect Material .
F.OH –Actual .................................................................................. XXX
Material …………….…..………………………………………..…….……. XXX

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 “FOH”
6-Repaire & Maint .
F.OH –Actual .................................................................................. XXX
Cash …………….…..…………………………….…….……. XXX

7-Indirect Labour.
F.OH –Actual .................................................................................. XXX
Payroll…………….…..…………………………….…….……. XXX

8-FOH Charged to Production

Work In Process .............................................................................. XXX
FOH Applied ….….…..…………………………….…….……. XXX

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 “Good Complete & Sold”
1-Cost Transfer from WIP .
Finished Goods .............................................................................. XXX
Work in process ………..……………………….…….……. XXX

2- Goods Sold.
Cost Of good Sold ......................................................................... XXX
Finished Goods ..…………………………….…….……. XXX

Cash / Account Receivable .......................................................... XXX

Sale ………………..…………………………….…….……. XXX

3-Cash Collection
Cash .......................................................................................... XXX
Account Receivable ……………………….…….……. XXX

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 “Good Complete & Sold”
4-Discount Allowed.
Sales Discount ..................................................................................... XXX
Account Receivable …..…………………………….…….……. XXX

5- Sales Return .
Finished Goods...................................................................................... XXX
Cost Of Goods Sold ..…………………………….…….……. XXX

Sales Return .......................................................................................... XXX

Account Receivable …………………………….…….……. XXX

6- Adj Of Under Applied OH

COGS ........................................................................................ XXX
Factory Overhead Control Account …………….…….……. XXX
6- Adj Of Over Applied OH
Factory Overhead Control Account …………….…….……. XXX
COGS ................................................................................................ XXX

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