Managerial Accounting: Cost Sheet Preparation

Application:
Cost Calculation Software.

Question:

Prepare cost sheet for ABC Corporation for last year,
(i) Determine cost of goods manufactured.
(ii) Determine cost of goods sold.
(iii) Prepare an income statement.

Selling expenses 140000
Raw materials Inventories, January 1 90000
Raw materials Inventories, December 31 60000
Direct Labor Cost 150000
Purchase of raw materials 750000
Sales 2500000
Administrative expenses 270000
Manufacturing overhead 640000
Work in process inventory, January 1 180000
Work in process inventory, January 1 100000
Finished goods inventory, January 1 260000
Finished goods inventory, December 31 210000

 

Solution:

ABC Corporation
Statement of cost of goods sold
Particulars Amount ($) Amount ($)
Direct Materials: Raw materials, January 1 90000
Add: Purchase of raw materials 750000
* Raw Materials Available for use 840000
Deduct: Raw Materials, December 31 (60000)
* Raw Materials used / consumed 780000
Add: Direct Labor cost 150000
* Prime cost 930000
Add: Manufacturing overhead 640000
* Total manufacturing cost 1570000
Add: Work in process, January 1 180000
Less: Work in process, January 1 (100000)
(i) Cost of goods manufactured 1650000
Add: Finished goods Inventory, January 1 260000
* Finished goods available for sale 1910000
Less: Finished goods Inventory, December 31 (210000)
(ii) Cost of goods sold 1700000
Note:

Statement of cost of goods sold has both cost of goods manufactured and cost of goods sold. So calculating the Statement of cost of goods sold we can get both.


 

Income Statement:

ABC Corporation
Income statement
For the year ended December 31
Particulars Amount ($) Amount ($)
Sales 2500000
Less: Cost of goods sold (1700000)
* Gross Profit 800000
Less: Operating Expenses
Selling Expenses (140000)
Administrative Expenses (270000)
* Operating Income 390000
Note:

Only manufacturing cost are shown in COGS statement. Non manufacturing cost such as selling, administrative costs are shown in income statement.

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