University:
California State University, Northridge
Course:
ACCT 230 | Introduction to Managerial Accounting
Academic year:

2024
Views:

201

Pages:

14
Author:

winterenpih

Comparing Merchandising and Manufacturing Activities Merchandisers . . . Manufacturers . . .  Buy finished goods.  Buy raw materials.  Sell finished goods.  Produce and sell finished goods. MegaLoMart Manufacturing Costs Direct Materials Direct Labor The Product Factory Overhead Direct Materials Those materials that become an integral part of the product and that can be conveniently traced directly to it. Example: A radio installed in an automobile Direct Labor Those labor costs that can be easily traced to individual units of product. Example: Wages paid to automobile assembly workers Factory Overhead Manufacturing costs that cannot be traced directly to specific units produced. Examples: Indirect labor and indirect materials Wages paid to employees who are not directly involved in production. Examples: maintenance workers, janitors and security guards. Materials used to support the production process. Examples: lubricants and cleaning supplies used in the automobile assembly plant. Balance Sheet Merchandiser Current Assets:  Cash  Receivables  Prepaid expenses  Merchandise Partially complete inventory products – some material, labor, or overhead has been added. Manufacturer Current Assets: Cash Receivables Materials waiting to be processed. Prepaid Expenses Inventories Raw Materials Goods in Process Finished Goods Completed products awaiting sale. The Income Statement Cost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers. Merchandising Company Cost of goods sold: Beg. merchandise inventory + Cost of merch. purchased Goods available for sale - Ending merchandise inventory = Cost of goods sold $ 14,200 234,150 $ 248,350 (12,100) $ 236,250 Manufacturing Company Cost of goods sold: Beg. finished goods inv. $ 14,200 + Cost of goods manufactured 234,150 Goods available for sale $ 248,350 - Ending finished goods inventory (12,100) = Cost of goods sold $ 236,250 Manufacturing Cost Flows Costs Balance Sheet Inventories Material Purchases Raw Materials Direct Labor Goods in Process Factory Overhead Selling and Administrative Finished Goods Period Costs Income Statement Expenses Cost of Goods Sold Selling and Administrative Expenses Product Costs – Raw Materials Raw Materials Manufacturing Costs Goods In Process Beginning raw materials inventory Beginning inventory is the inventory carried over from the prior period. Product Costs – Direct Materials Raw Materials + = – = Beginning raw materials inventory Raw materials purchased Raw materials available for use Ending raw materials inventory Direct materials used Manufacturing Costs Goods In Process Direct materials As items are removed from raw materials inventory and placed into the production process, they are called direct materials. Product Costs – Total Manufacturing Costs Raw Materials + = – = Beginning raw materials inventory Raw materials purchased Raw materials available for use Ending raw materials inventory Direct materials used Manufacturing Costs Direct materials + Direct labor + Factory overhead = Total manufacturing costs Goods In Process Conversion costs are costs incurred to convert the direct material into a finished product. Product Costs – Goods in Process Raw Materials + = – = Beginning raw materials inventory Raw materials purchased Raw materials available for use Ending raw materials inventory Direct materials used Manufacturing Costs Direct materials + Direct labor + Factory overhead = Total manufacturing costs Goods In Process Total manufacturing costs + Beginning goods in process inventory = Total goods in process All manufacturing costs incurred during the period are added to the beginning balance of goods in process. Product Costs – Cost of Goods Manufactured Raw Materials Beginning raw materials inventory + Raw materials purchased = Raw materials available for use – Ending raw materials inventory = Direct materials used Costs associated Manufacturing Costs Goods In Process Direct materials + Direct labor + Factory overhead = Total manufacturing costs Total manufacturing costs Beginning goods in process inventory Total goods in process Ending goods in process inventory Cost of goods manufactured with the goods that are completed during the period are transferred to finished goods inventory. + = – = Product Costs – Cost of Goods Sold Goods In Process + = – = Total manufacturing costs Beginning goods in process inventory Total goods in process Ending goods in process inventory Cost of goods manufactured Finished Goods Beginning finished goods inventory + Cost of goods manufactured = Cost of goods available for sale - Ending finished goods inventory Cost of goods sold