Chapter 1 : Managerial Accounting Concepts and Principles A. Determine Product Costs: Fixed Cost: unchanged regardless of how many units produced. Ex: Rent Expense, Salary Variable Cost: increase when more units produced. Ex: Raw Material, Hourly Wage, Utilities PRODUCT COSTS Direct Material (DM) Direct Labor (DL) Factory Overhead (FO) : + Indirect Labor ( IL) + Indirect Material (IM) + Other Overhead Expenses PERIOD COSTS Advertising Expense Sale Commision Admin & General Expense Income Tax 1 B. Schedule Cost of Goods Manufacturing (COGM): Ex: Prepare a Schedule Cost of Goods Manufacturing (COGM) based on the following information: Beginning Raw Materials Inventory Ending Raw Materials Inventory Beginning Work in Process Inventory Ending Work in Process Inventory Beginning Finished Goods Inventory Ending Finished Goods Inventory $15,000 10,600 29,000 44,000 24,000 37,400 Raw material purchased Direct Labor Used Total Factory Overhead used 66,000 38,000 80,000 How much is Direct Material Used …………………………………………………………. How much is Direct Labor ………………………………………………………………. How much is Factory Overhead ……………………………………………………….. How much is Cost of Goods Manafactured (COGM) ……………………………………… How much is Cost of Goods Sold (COGS) ………………………………………………………………… 2 Practice: ASSET Expense BB COGS Avail for Use: Direct Material Used EB BB Avail. For Mfg: COGM EB BB Avail. For Sale: COGS EB. 3 Chapter 1 : Practice Product Cost ACCOUNT TITLE Product Cost Factory Overhead Cost Period Cost Direct Material (DM) Avertising Expense 85,000 Total 1 1. Total Direct Material Cost Total Direct Labor Total Factory Overhead Total Selling Expense Total Admin & General ASSET: = ………………………………………………………. = ……………………………………………………….. = ……………………………………………………….. = ………………………………………………………… = ……………………………………………………….. EXPENSE: ……. ……. …………….. ……………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………………………………………… …….. AMOUNTS: DIRECT MATERIAL (DM): …….. …….. …….. ……………. …….. …………………………………………………………………………………………… …………………………………………… …………………………………………………………………………………………… …………………………………………… …………………………………………………………………………………………… …………………………………………… …………………………………………………………………………………………… …………………………………………… …………………………………………………………………………………………… …………………………………………… DIRECT LABOR (DL): …………………………………………… FACTORY OVERHEAD (FOH) …………………………………………… Total Manufacturing Cost …………………………………………… Add Work in Progress Begin Balance BB Dec 31, 2014 …………………………………………… Total Cost of Work In Progress during 2015 …………………………………………… Less Work In Progress Ending Balance EB Dec 31, 2015 …………………………………………… COST OF GOODS MANUFACTURED (COGM) DURING 2015 …………………………………………… ……………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………………………………………… SALES: …….. …….. AMOUNTS: Cost of Goods Sold (COGS) : …………….. …………………………………………… ……………………………………………………… …………………… ……………………………………………………… …………………… ……………………………………………………… …………………… ……………………………………………………… …………………… ……………………………………………………… ………………….. GROSS PROFIT : …………………………………………… …………………………………………… OPERATING EXPENSE : ……………………………………………………… …………………… ……………………………………………………… …………………… ……………………………………………………… …………………… ……………………………………………………… …………………… ……………………………………………………… …………………… ……………………………………………………… …………………… ……………………………………………………… …………………… …………………………………………… INCOME BEFORE INCOME TAX : …………………………………………… INCOME TAX : …………………………………………… NET INCOME : …………………………………………… 2