Post on 18-Jan-2016
Alex Socratis - Accounting Department
Manufacturing Accounting
Learning Objective 1
Preparing a cost of goods manufacturing schedule
Alex Socratis - Accounting Department
Manufacturing Accounting
Specialized accounting concepts and techniques required to record, report, and control the operations of a manufacturing company
Alex Socratis - Accounting Department
Costs
Separate Manufacturing from Administrative
Manufacturing Costs ◦Raw materials◦Direct labor◦Overhead
Administrative Costs◦Selling◦Administrative
Alex Socratis - Accounting Department
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Manufacturing Costs
Raw materials – material that is to be processed into a finished product
Direct labor – wages of those person whose efforts directly affect the quality or other characteristics of the products manufactured
Alex Socratis - Accounting Department
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Manufacturing Costs
Overhead – all other manufacturing costs not included in raw material or direct labor◦ Maintenance wages/supplies◦ Production supervision & expenses◦ Depreciation expense of manufacturing
assets◦ Rent expense for buildings/machinery◦ Electricity for manufacturing◦ Insurance expense for manufacturing◦ Indirect labor◦ Manufacturing clerical wages
Alex Socratis - Accounting Department
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Manufacturing Inventories
Raw materials inventory – cost of items of raw material being held for production + freight costs
Work-in-process inventory – cost of products being processed
Finished goods inventory – manufacturing cost of products that have been completed and are awaiting shipment to customers
Alex Socratis - Accounting Department
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Cost of Goods Sold
Beginning Finished Goods Inventory
+ Cost of Goods Manufactured= Cost of Good Available for Sale- Ending Finished Goods
Inventory= Cost of Goods Sold
Alex Socratis - Accounting Department
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• Different from a merchandise co.• Purpose is to properly match
manufacturing costs with sales• Must include beginning & ending finished
goods
Raw materialsused
Factoryoverhead
Directlabor
Cost ofgoods sold
Cost of Goods Manufactured
Work-in-Processinventory
FinishedGoods
Inventory
Alex Socratis - Accounting Department
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Cost of Goods Manufactured
Cost of Raw Materials Used:
Beginning raw materials inventory+ Purchases of Inventory- Ending raw material inventory
Alex Socratis - Accounting Department
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Cost of Goods Manufactured
Total manufacturing costs incurred:
Cost of raw materials used+ Direct labor+ Factory Overhead
Alex Socratis - Accounting Department
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Cost of Goods Manufactured
Cost of goods manufactured:
Total manufacturing costs+ Beginning work-in-process inventory- Ending work-in-process inventory
Alex Socratis - Accounting Department
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Problem 25B-1
Alex Socratis - Accounting Department
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Total manufacturing costsWork-in-process Inventory, 7-31Work-in-process Inventory, 7-31Total Cost of Goods Manufactured
Learning Objective 2
Journalizing transactions recording the manufacturing process
Alex Socratis - Accounting Department
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Source Documents
Required data are submitted to cost accountants.
Timely receipt of legible documents is often a problem.
Employees must be aware of importance.
Alex Socratis - Accounting Department
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Source Documents
Receiving reports - prepared by receiving department; acknowledges receipt of materials & supplies from vendors
Material requisitions - documents initiated by manufacturing personnel or other users to request material from inventory warehouse
Clock card - card used by each hourly employee, collected each week by payroll department
Alex Socratis - Accounting Department
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Source DocumentsLot tickets - (move tickets)
documents written by dept. mgrs. to reflect movement of products or parts of products from one dept. to another
Labor distribution report – by-product of payroll allocated to direct & maintenance labor, etc…
Bills of lading - documents that show shipment of products to consumersAlex Socratis - Accounting Department
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Flow of Manufacturing Costs
Alex Socratis - Accounting Department
Cost of GoodsSold
Labor
RawMaterials
Ind
irec
t
FinishedGoods
FactoryOverhead
Direct
Applied Work-in- Process
Overhead Application
Two accounts◦Overhead – Control: debit to
accumulate all actual overhead costs◦Overhead – Applied: credit to
apply overhead to production
Alex Socratis - Accounting Department
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Overhead Application Rate
Annual overhead / Annual activity base
$250,000/$750,000 = 33%Activity base examples
◦Direct labor hours◦Direct labor costs◦Machine hours
Alex Socratis - Accounting Department
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Overhead Application Rate
Overhead based on direct labor hours:Annual overhead / Annual direct
labor hours
$250,000 / 150,000 hours = $1.67/hr
Direct labor hours for month = 1,500 hrs1,500 x $1.67 = $2,505
Alex Socratis - Accounting Department
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Overhead Application Rate
Overhead based on machine hours:Annual overhead / Annual machine
hours
$250,000 / 60,000 machine hours = $4.17/hr
Machine ran 2,000 hours$4.17 x 2,000 = $8,333.33
Alex Socratis - Accounting Department
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Problem 25B-2
Alex Socratis - Accounting Department
Work-in-Process
70,00075,000
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Problem 25B-2
Alex Socratis - Accounting Department
Work-in-Process
70,00075,00060,000
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Problem 25B-2
Alex Socratis - Accounting Department
Work-in-Process
70,00075,00060,000
180,000
Bal. 25,000
LO-2
Learning Objective 3
Preparing a worksheet for a manufacturing company
Alex Socratis - Accounting Department
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Worksheet for Manufacturing CompanyNew set of columns for
statement of cost of goods manufactured◦Beginning balances of raw materials
and work-in-process are listed in debit column
◦Ending balance are entered in credit column
◦Manufacturing expenses in debit column
Alex Socratis - Accounting Department
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Worksheet for Manufacturing CompanyIncome Statement columns
◦Beginning balance of finished goods in debit column
◦Ending balance in credit column◦Revenues are credited and expenses
are debited
Alex Socratis - Accounting Department
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Worksheet for Manufacturing CompanyBalance Sheet columns
◦Is done similar to a traditional balance sheet
◦Assets is debited and liabilities and owner’s equity are credited
Alex Socratis - Accounting Department
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Reports Prepared from the WorksheetStatement of Cost of Goods
Manufactured-
Alex Socratis - Accounting Department
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Reports Prepared from the WorksheetIncome Statement
Alex Socratis - Accounting Department
Net Sales: 398,000$ Cost of Goods Sold
Finished Goods Inventory (Beg.) 40,000$ Cost of Goods Manufactured 267,000Cost of Goods Available for Sale 307,000$ Less: Finished Goods Inventory (End.) 28,000
Cost of Goods Sold: 279,000$ Gross Profit on Sales 119,000$
Operating Expenses:Selling Expense 15,450$ Admistrative Expense 9,560
Total Operating Expenses 25,010$ Net Income (before taxes) 93,990$
Samolis ManufacturingIncome Statement
For Month Ended March 31, 20XX
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Reports Prepared from the WorksheetBalance Sheet
Alex Socratis - Accounting Department
ASSETSCurrent Assets
Cash 350,000$ Accounts Receivable 245,000$ Less: Allowance for Doubtful Accounts 130,000 115,000$
InventoriesRaw Materials 96,000$ Work-in-Process 18,000Finished Goods 28,000 142,000$
Prepaid ExpensesFactory Supplies 2,500Prepaid Factory Insurance 3,000 5,500$ Total Current Assets 612,500$
Plant and Equipment:Factory Machinery 78,000$ Less: Accum. Deprec., Factory Machinery 19,500 58,500$
Total Assets 671,000$
SAMOLIS MANUFACTURINGBALANCE SHEETMARCH 31, 20XX
Liabilities and Stockholders' EquityCurrent Liabilities
Notes Payable 145,000$ Accrued Payroll Payable 21,000 166,000$
Stockholder's EquityCommon Stock, $100 par 2,000 shares 200,000$ Retained Earnings 305,000 505,000$
Total Liab. & Stockholders' Equity 671,000$
SAMOLIS MANUFACTURINGBALANCE SHEETMARCH 31, 20XX
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Alex Socratis - Accounting Department
End of Chapter