# 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.