I.

Types of Companies Based on What They Produce

and Sell:

1) Service Companies, i.e. AKBANK, AVIVASA, Hilton

 No inventory of service they provide and sell

2) Merchandising Companies, i.e. KIPA, MIGROS

 Merchandising Inventory (Account 153)

3) Manufacturing Companies, i.e. VESTEL, ARÇELİK

 Material Inventory - İlk Madde ve Malzeme 150

 Work In Process Inventory – Yarı Mamul 151
 Finished Goods Inventory – Mamul 152

II. Types of Costs/Expenses:

II.I. Period Costs/Expenses: (Operating Expenses)
1) Research and Development Expenses 750

 Salary expense of R&D personnel

 Utilities expense of R&D building
 Depreciation expense of R&D building, equipment,
furniture and fixture
 Insurance expense, Rent Expense and all other expenses
of R&D department
2) General Administrative Expenses 770

 Salary expense of administrative personnel

 Utilities expense of ADMINISTRATIVE building
 Depreciation expense of ADMINISTRATIVE building,
equipment, furniture and fixture
 Leasing expense
 Insurance expense, Rent Expense and all other expenses
of administrative department

3) Marketing Selling and Distribution Expenses 760

 Salary expense of MS&D personnel

 Utilities expense of MS&D building
 Depreciation expense of MS&D building, equipment,
furniture and fixture
 Leasing expense
 Insurance expense, Rent Expense and all other expenses
of MS&D department.
 Advertising and promotion expense
II.II. Manufacturing Expenses:
1. Direct Material Expense 710.DİMMG
2. Direct Labor Expense 720.DİG
3. Manufacturing Overhead Expenses 730.GÜG

What is Direct Material?

A material is called direct material if
1. IT is in physical structure of the product produced.
2. In terms of both quantity and cost, IT occupies a
significant portion within the product produced.
3. It is both possible and feasible (economical) to trace how
much of IT is used within each product produced.

Example:

Material for production of a desk (in the manufacturing

department/plant):
 Wood - DM
 Covering Material - DM
 Glue - IM
 Nails - IM
 Machine Oil - IM
 Cleaning Supplies and detergent - IM
What is Direct Labor?
The amount of time spent for production process by
production workers.
Every other type of labor else in manufacturing process and
plant, is classified as indirect labor

Example:
A production worker
 Works 2 hours for cutting wood - DL
 Gives a 30 minutes coffee break - IL
 Works 1 hour 30 minutes for shaping wood - DL
 Works 3 hours for assembling parts to each other - DL
 Trains a new employee for 1 hour - IL
 A technician/engineer works 8 hours for routine
maintenance and repair of manufacturing machines - IL
 A janitor works 8 hours for cleaning and disinfecting - IL

What are Manufacturing Overhead Expenses?

 Indirect material
 Indirect labor
 Rent expense of manufacturing plant
 Insurance expense of manufacturing plant
 Depreciation expense of manufacturing plant
 Depreciation expense of manufacturing machinery,
fixture and equipment
  Leasing expenses of manufacturing equipment
 All other MANUFACTURING RELATED EXPENSES
Question 1: Data about Company A is given below:

Direct Material Inventory, January 1, 2017 200.000

WIP Inventory, January 1, 2017 150.000
Finished Goods Inventory, January 1, 2017 180.000
Utilities expense of administrative department 60.000
Interest Revenue 150.000
Rent expense of manufacturing plant 500.000
Sales return 50.000
Direct Material Purchase in 2017 1.000.000
Insurance expense of marketing vehicles 220.000
Depreciation Expense of Manufacturing 400.000
Equipment
Depreciation expense of marketing vehicles 390.000
Sales Revenue 6.000.000
Utilities Expense of Marketing Department 180.000
Utilities expense of manufacturing department 520.000
Indirect Material expense 160.000
Sales Discount 100.000
Dividend Revenue 200.000
Indirect labor expense 180.000
Interest Expense 100.000
Tax Expense %20
Direct Labor Expense 1.200.000
Direct Material Inventory, December 31, 2017 160.000
WIP Inventory, December 31, 2017 200.000
Finished Goods Inventory, December 31, 2017 80.000

Required:
Prepare a Cost of Goods Manufactured/Sold Statement and an
Income Statement of Company A for the year 2017
Statement of COGM/COGS - 2017:
Direct Material Expense 1.040.000

Beginning DM Inventory 200.000

(+) Purchases 1.000.000
(-) Ending DM Inventory 160.000

Direct Labor Expense 1.200.000

Manufacturing Overhead Expense 1.760.000

Rent expense 500.000

Depreciation expense 400.000
Utilities expense 520.000
Indirect material expense 160.000
Indirect Labor expense 180.000

Total Manufacturing Cost for 2017 4.000.000

(+) Beginning WIP Inventory 150.000

(-) Ending WIP Inventory 200.000

Total Cost of Goods Manufactured 3.950.000

(+) Beginning FG Inventory 180.000

(-) Ending FG Inventory 80.000

Cost of Goods Sold 4.050.000

Income Statement
Sales Revenue 6.000.000

(-) Sales Returns & Allowances (50.000)

(-) Sales Discount (100.000)

Net Sales 5.850.000

(-) COGS (4.050.000)

Gross P/L 1.800.000

(+) Other Revenues 350.000

Interest revenue 150.000

Dividend Revenue 200.000

(-) Operating Expenses (850.000)

Utilities expense-administrative 60.000

Insurance expense 220.000
Depreciation expense 390.000
Utilities expense-marketing 180.000

EBIT - Earnings before Interest 1.300.000

and Tax Expenses

(-) Interest Expense (100.000)

(-) Tax Expense (%20) (240.000)

Net P/L 960.000

Taxable Income = EBIT – Interest Expense = 1.200.000