Chapter 18, Problem 15E

To determine

Concept Introduction:

Schedule of cost of goods manufactured: A schedule of cost of goods manufactured is a schedule explaining the flow of costs from raw material to the result as cost of goods manufactured for a period. The cost of goods manufactured amount if transferred to the finished goods inventory and is used to calculate cost of goods sold on income statement.

The schedule of cost of goods manufactured is as under –

Schedule of Cost of Goods manufactured
	Raw Material - Beginning
Add:	Purchases of Raw material
Less:	Raw Material - Ending
	Raw material consumed
Add:	Direct labor
	Manufacturing Overheads
Add:	Indirect labor
Add:	Factory computer supplies used
Add:	Repairs - Factory Equipment
	Rent Cost of factory building
	Total Manufacturing costs
Add:	Working in Process inventory - Beginning
Less:	Working in Process inventory - Ending
	Cost of Goods manufactured

Cost of goods sold: The cost of goods sold can be defined as the cost incurred in order to convert a raw material into finished goods. The cost of goods sold includes direct expenses i.e. direct material, direct labor and overheads like - variable manufacturing overheads and fixed manufacturing overhead as well. It is subtracted from the sales to know the gross profit of the business.

Cost of goods sold is calculated as under –

$Costofgoodssold=Beginning\text{ Finished goods }+Costofgoodsmanufactured–Ending\text{ Finished goods}$

Requirement 1

To prepare:

Schedule of cost of goods manufactured

Answer to Problem 15E

Solution:

Schedule of Cost of Goods manufactured
	Raw Material - Beginning	10,000
Add:	Purchases of Raw material	45,000
Less:	Raw Material - Ending	8,500
	Raw material consumed		46,500
Add:	Direct labor		27,500
	Manufacturing Overheads
Add:	Factory Overhead	55,000
	Total manufacturing overheads		55,000
Add:	Working in Process inventory - Beginning		14,000
Less:	Working in Process inventory - Ending		12,000
	Cost of Goods manufactured		131,000

Explanation of Solution

The schedule of cost of goods manufactured as is prepared as under –

Given,

• Raw material – Beginning = $ 10,000

• Work in process inventory – Beginning = $ 14,000

• Raw material purchases = $ 45,000

• Direct Labor = $ 27,500

• Overhead = $ 55,000

• Raw material – Ending = $ 8,500

• Work in process inventory – Ending = $ 12,000

This is the information related to the costs involved in the process of converting raw material into manufactured goods.

a. Raw material consumed is calculated as under –

$\begin{array}{l}Rawmaterialconsumed=\\ RawmaterialBeginning\\ +Rawmaterialpurchases\\ -RawmaterialEnding\end{array}$

$\begin{array}{l}Rawmaterialconsumed=\$\text{ 10},000+\$\text{ 4}5,000-\$\text{ 8,5}00\\ Rawmaterialconsumed=\$\text{ 46,500}\end{array}$

b. Cost of goods manufactured is calculated as under –

$\begin{array}{l}Costofgoodsmanufactured=\\ Rawmaterialconsumed\\ +Directlabor\\ +Overheads\\ +WorkinprocessinventoryBeginning\\ \text{- }WorkinprocessinventoryEnding\end{array}$

$\begin{array}{l}Costofgoodsmanufactured=\$\text{ 46,500 }+\$\text{ 27,500 }+\$\text{ 55,000 }+\$\text{ 14,000 }-\$\text{ 12,000}\\ Costofgoodsmanufactured=\$\text{ 131,000}\end{array}$

This is how cost of good manufactured is calculated.

Conclusion

Thus, the schedule of cost of goods manufactured has been prepared.

To determine

Requirement 2

To compute:

Cost of Goods sold for the year

Answer to Problem 15E

Solution:

Cost of Goods sold for the year = $ 129,000

Explanation of Solution

Given,

• Beginning Finished goods = $ 16,000

• Cost of goods manufactured = $ 131,000

• Ending Finished goods = $ 18,0000

Cost of goods sold –

$\begin{array}{l}Costofgoodssold=Beginning\text{ Finished goods }+Costof\text{ goods manufactured }–Ending\text{ Finished goods}\\ Costofgoodssold=\$\text{ 16},000+\$131,000-\$\text{ 18},000\\ Costofgoodssold=\$\text{ 129,000}\end{array}$

The cost of goods sold for year = $ 129,000.

Conclusion

Thus, the cost of goods sold for the company has been calculated for the year.