Chapter 18, Problem 8E

To determine

Concept Introduction-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.

Requirement-1:

To PrepareTo prepare schedule of cost of goods manufactured.

Answer to Problem 8E

Schedule of cost of goods manufactured is prepared as under-

Cost of goods manufactured
	Garcon Co.	Pepper Co.
Particulars	Amount ($)	Amount ($)	Amount ($)	Amount ($)
Beginning raw material inventory	7,250		9,000
Add: Raw materials purchases	33,000		52,000
Raw material available for use	40,250		61,000
Less: Raw material ending balance	5,300		7,200
Direct material used		34,950		53,800
Direct labor		19,000		35,000
Factory overheads:
Rental cost on factory equipment	27,000		22,750
Factory utilities	9,000		12,000
Factory supplies used	8,200		3,200
Indirect labor used	1,250		7,660
Repair factory equipment	4,780		1,500
Total factory overhead		50,230		47,110
Total manufacturing costs		104,180		135,910
Add: Work in process, beginning balance		14,500		19,950
Total cost of work in process		118,680		155,860
Less: Work in process, ending balance		22,000		16,000
Cost of goods manufactured		96,680		139,860

Explanation of Solution

Garcon Co.

Direct material used is calculated as follows-

  $\begin{array}{l}\begin{array}{l}Directmaterialused=Beginningrawmaterialinventory+Rawmaterialspurchases\\ -Rawmaterialendingbalance\end{array}\hfill \\ Directmaterialused=\$7,250+\$33,000-\$5,300\hfill \\ Directmaterialused=\$34,950\hfill \end{array}$

  $\begin{array}{l}\begin{array}{l}Totalfactoryoverheads=Rentalcostonfactoryequipment+Factoryutilities+Factorysuppliesused\\ +Indirectlaborused+Repairfactoryequipment\end{array}\hfill \\ Totalfactoryoverheads=\$27,000+\$9,000+\$8,200+\$1,250+\$4,780\hfill \\ Totalfactoryoverheads=\$50,230\hfill \end{array}$

  $\begin{array}{l}Totalmanufacturingcosts=Directmaterialused+Directlabor+Totalfactoryoverheads\hfill \\ Totalmanufacturingcosts=\$34,950+\$19,000+\$50,230\hfill \\ Totalmanufacturingcosts=\$104,180\hfill \end{array}$

Cost of goods manufactured is calculated as follows-

  $\begin{array}{l}\begin{array}{l}Costofgoodsmanufactured=Totalmanufacturingcosts+Workinprocess,beginninginventory\\ -Workinprocess,endinginventory\end{array}\hfill \\ Costofgoodsmanufactured=\$104,180+\$14,500-\$22,000\hfill \\ Costofgoodsmanufactured=\$96,680\hfill \end{array}$

Pepper Co.

  $\begin{array}{l}\begin{array}{l}Directmaterialused=Beginningrawmaterialinventory+Rawmaterialspurchases\\ -Rawmaterialendingbalance\end{array}\hfill \\ Directmaterialused=\$9,000+\$52,000-\$7,200\hfill \\ Directmaterialused=\$53,800\hfill \end{array}$

  $\begin{array}{l}\begin{array}{l}Totalfactoryoverheads=Rentalcostonfactoryequipment+Factoryutilities+Factorysuppliesused\\ +Indirectlaborused+Repairfactoryequipment\end{array}\hfill \\ Totalfactoryoverheads=\$22,750+\$12,000+\$3,200+\$7,660+1,500\hfill \\ Totalfactoryoverheads=\$47,110\hfill \end{array}$

  $\begin{array}{l}Totalmanufacturingcosts=Directmaterialused+Directlabor+Totalfactoryoverheads\hfill \\ Totalmanufacturingcosts=\$53,800+\$35,000+\$47,110\hfill \\ Totalmanufacturingcosts=\$135,910\hfill \end{array}$

Cost of goods manufactured is calculated as follows-

  $\begin{array}{l}\begin{array}{l}Costofgoodsmanufactured=Totalmanufacturingcosts+Workinprocess,beginninginventory\\ -Workinprocess,endinginventory\end{array}\hfill \\ Costofgoodsmanufactured=\$135,910+\$19,950-\$16,000\hfill \\ Costofgoodsmanufactured=\$139,860\hfill \end{array}$

Conclusion:

Thus, cost of goods manufactured for both the companies are calculated.

To determine

Concept Introduction-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.

Requirement-2:

To Compute:

To compute cost of goods sold.

Answer to Problem 8E

Schedule of Cost of goods sold
	Garcon Co.	Pepper Co.
Particulars	Amount ($)	Amount ($)
Cost of goods manufactured	96,680	139,860
Add: Finished goods inventory, beginning balance	12,000	16,450
Goods available for sale	108,680	156,310
Less: Finished goods inventory, ending balance	17,650	13,300
Cost of goods sold	91,030	143,010

Explanation of Solution

Garcon Co.

  $\begin{array}{l}\begin{array}{l}Costofgoodssold=Costofgoodsmanufactured+Finishedgoodsinventory,beginningbalance\\ -Finishedgoodsinventory,endingbalance\end{array}\hfill \\ Costofgoodssold=\$96,680+\$12,000-\$17,650\hfill \\ Costofgoodssold=\$91,030\hfill \end{array}$

Pepper Co.

  $\begin{array}{l}\begin{array}{l}Costofgoodssold=Costofgoodsmanufactured+Finishedgoodsinventory,beginningbalance\\ -Finishedgoodsinventory,endingbalance\end{array}\hfill \\ Costofgoodssold=\$139,860+\$16,450-\$13,300\hfill \\ Costofgoodssold=\$143,010\hfill \end{array}$

Conclusion:

Thus, cost of goods sold for both the companies are calculated.