COST OF GOODS

MANUFACTURED
AND COST OF
GOODS SOLD
Joey Raine Jamero, CPA
OBJECTIVES
Classes of Inventory in a Manufacturing Firm
Stages of Production
Costing for a Service Provider
Cost of Goods Sold
Cost of Goods Manufactured
Cost of Goods Manufactured and Cost of Goods Sold 3

CLASSES OF INVENTORY IN A MANUFACTURING FIRM

AND STAGES OF PRODUCTIONS

Fully
Production Work not Work started but not yet
Stage completed
started completed
work
Finished
Materials
Controlling Work in Process Inventory Goods
Accounts Inventory
Inventory
Job Order Cost Sheet (for job
Materials order costing) Finished
Subsidiary
Records
Ledger Goods
Card Cost of Production Report (for Inventory
process costing)
Cost of Goods Manufactured and Cost of Goods Sold 4

COSTING FOR A SERVICE PROVIDER

OR SERVICE COMPANIES
Like product costs, cost of services includes three (3) components: Direct
Materials, Direct Labor & Overhead. However, the proportions of each may
vary since service firms typically have few material costs and large amounts
of labor & overhead. Although they have both direct & indirect costs, they
generally have larger proportions of indirect costs. So the predetermined
overhead rate is typically based on direct labor cost.

It is also common to combine labor cost with the redetermined overhead

rate, so the amount charged to a job for each direct labor hour represents
both labor and overhead. The only remaining items to be charged to each job
are the directly traceable costs other than labor.
COST OF GOODS SOLD IN
A MANUFACTURING FIRM
Schedule of Direct Materials Used
Schedule of Work in Process
Cost of Goods Manufactured
Cost of Goods Manufactured and Cost of Goods Sold 6

SCHEDULE OF DIRECT MATERIALS USED

Materials Inventory, beginning xxxx

Add: Net Purchases of Materials

Purchases xxxx

Less: Purchase Discounts (xxxx)

Less: Purchase Returns and Allowances (xxxx) xxxx

Materials Available for Use xxxx

Less: Materials Inventory, ending (xxxx)

Direct Materials Used xxxx

Cost of Goods Manufactured and Cost of Goods Sold 7

SCHEDULE OF WORK IN PROCESS

Work in Process Inventory, beginning xxxx
Add: Manufacturing Costs for the period
Direct Materials Used xxxx
Direct Labor xxxx
Applied Factory Overhead xxxx xxxx
Total Manufacturing Costs xxxx
Less: Work in Process Inventory, ending (xxxx)

Cost of Goods Manufactured xxxx

Cost of Goods Manufactured and Cost of Goods Sold 8

COST OF GOODS MANUFACTURED

Direct Materials Used:
Materials Inventory, beginning xxxx
Add: Net Purchases of Materials
Purchases xxxx
Less: Purchase Discounts (xxxx)
Less: Purchase Returns and Allowances (xxxx) xxxx
Materials Available for Use xxxx
Less: Materials Inventory, ending (xxxx) xxxx
Direct Labor xxxx
Applied Factory Overhead
Indirect Materials xxxx
Indirect Labor xxxx
Factory Utilities xxxx
Depreciation of Factory Assets xxxx
Miscellaneous Factory Overhead xxxx xxxx
Total Manufacturing Costs for the period xxxx
Add: Work in Process Inventory, beginning xxxx
Less: Work in Process Inventory, ending (xxxx)
Cost of Goods Manufactured xxxx
Cost of Goods Manufactured and Cost of Goods Sold 9

COST OF GOODS SOLD

Finished Goods Inventory, beginning xxxx
Add: Cost of Goods Manufactured xxxx
Total Goods Available for Sale xxxx
Less: Finished Goods Inventory, ending (xxxx)
Total Cost of Goods Sold xxxx
Cost of Goods Manufactured and Cost of Goods Sold 10

COST OF GOODS MANUFACTURED AND SOLD

Direct Materials Used:
Materials Inventory, beginning xxxx
Add: Net Purchases of Materials
Purchases xxxx
Less: Purchase Discounts (xxxx)
Less: Purchase Returns and Allowances (xxxx) xxxx
Materials Available for Use xxxx
Less: Materials Inventory, ending (xxxx) xxxx
Direct Labor xxxx
Applied Factory Overhead
Indirect Materials xxxx
Indirect Labor xxxx
Factory Utilities xxxx
Depreciation of Factory Assets xxxx
Miscellaneous Factory Overhead xxxx xxxx
Total Manufacturing Costs for the period xxxx
Add: Work in Process Inventory, beginning xxxx
Less: Work in Process Inventory, ending (xxxx)
Cost of Goods Manufactured xxxx
Add: Finished Goods Inventory, beginning xxxx
Total Goods Available for Sale xxxx
Less: Finished Goods Inventory, ending (xxxx)
Total Cost of Goods Sold xxxx
 LIVING AS KAI’S 11

COST ACCOUNTANT
Kim Kai Corporation is in the business of manufacturing high-end Teddy
Bears. He has incurred the following costs for the month of September
2022:

• direct labor, P2,500,000;

• direct materials purchases, P2,500,000; purchase returns of P750,000;
and purchase discounts of P250,000.

In addition, the following costs were incurred in during the same month: Other information:

Inventories were costed as follows:

• Monthly rent, P1,000,000; 75% of the rented building is associated to
2022
production.
September 1 September 30
• Advertising expense, P200,000. Finished goods P250,000 P300,000
• Monthly salary of the Production Managers, Mark Lee and Ten Lee, Work in process 450,000 550,000
P80,000 per manager. Materials 75,000 125,000
• Electricity and Utilities, P2,000,000; 20% of which pertains to the selling
and administration. Required:
• Monthly insurance on the production facility, P1,000,000.
Prepare the (1) Schedule of Direct Materials Used, (2) Schedule of
• Other expenses, P700,000, to which 70% is indirectly attributable to the
Work in Process, (3) Cost of Goods Manufactured, and (4) Cost of
teddy bears.
Goods Manufactured and Sold
ANY QUESTIONS?
Thank you!