Question

The following cost and inventory data are taken from the accounting records of a Company for the year just completed:

Costs incurred:

Direct labor cost ................................................... $140,000
Purchases of raw materials .................................. $236,000
Manufacturing overhead ...................................... $160,000
Advertising expense ............................................. $180,000
Sales salaries ....................................................... $100,000
Depreciation, office equipment ............................ $6,000

Inventories: Beginning the Year End the Year
Raw materials ............................ $14,000 $30,000
Work in process .......................... $20,000 $10,000
Finished goods ............................ $40,000 $70,000

Required:
1. Prepare the cost of goods sold section of Company’s income statement for the year.

Answer 1

First Prepare Statement of Cost of goods Manfactured
Particulars			Amount
Direct Materials :
Beginning R/M inventory	$   14,000
Add : Purchases of raw materials	$ 236,000
Raw materials available for use	$ 250,000
Less : Ending R/M inventory	$ (30,000)
Raw materials used in production			$        220,000
Direct labour			$        140,000
Manfacturing Overhead			$        160,000
Total manfacturing Costs			$      520,000
Add : Beginning WIP			$         20,000
Less : Ending WIP			$        (10,000)
Cost of Goods Manfactured			$      530,000
Statement of Cost of Goods sold ;
Particulars			Amount
Beginning Finished goods inventory			$         40,000
Add : Cost of goods manfactured			$        530,000
Goods available for sale			$      570,000
Less :Ending finished goods inventory			$        (70,000)
Cost of goods sold			$      500,000