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 COST OF GOODS SOLD
Direct Materials, beginning inventory
+ Direct Materials Purchases
– Direct Materials, ending inventory
Direct Materials Used in Production

Direct Materials Used in Production

+ Direct Labor
+ Manufacturing Overhead
Total Product Cost

Total Product Cost

+ Work in Process, beginning inventory
– Work in Process, ending inventory
Cost of Goods Manufactured

Cost of Goods Manufactured

+ Finished Goods, beginning inventory
Goods Available for Sale Hand-out
– Finished Goods, ending inventory
Cost of Goods Sold
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Cost of Goods Sold
Statement
Example

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Quick Check 
Beginning raw materials inventory was $32,000. During the
month, $276,000 of raw material was purchased. Account
at the end of the month revealed that $28,000 of raw
material was still present. What is the cost of direct
material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2,000

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Quick Check 
Beginning raw materials inventory was $32,000. During the
month, $276,000 of raw material was purchased. A count
at the end of the month revealed that $28,000 of raw
material was still present. What is the cost of direct
material used? Beg. raw materials $ 32,000
A. $276,000 + Raw materials
purchased 276,000
B. $272,000 = Raw materials available
for use in production $ 308,000
C. $280,000 – Ending raw materials
inventory 28,000
D. $ 2,000
= Raw materials used
in production $ 280,000

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Quick Check 
Direct materials used in production totaled
$280,000. Direct labor was $375,000 and factory
overhead was $180,000. What were total
manufacturing costs incurred for the month?
A. $555,000
B. $835,000
C. $655,000
D. Cannot be determined.

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 Direct Materials $ 280,000
+ Direct Labor 375,000
Quick Check  + Mfg. Overhead
= Mfg. Costs Incurred
180,000

for the Month $ 835,000

Direct materials used in production totaled

$280,000. Direct labor was $375,000 and factory
overhead was $180,000. What were total
manufacturing costs incurred for the month?
A. $555,000
B. $835,000
C. $655,000
D. Cannot be determined.

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Quick Check 
Beginning work in process was $125,000.
Manufacturing costs incurred for the month
were $835,000. There were $200,000 of partially
finished goods remaining in work in process
inventory at the end of the month. What was
the cost of goods manufactured during the
month?
A. $1,160,000
B. $ 910,000
C. $ 760,000
D. Cannot be determined.
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 Beginning work in
process inventory $ 125,000
+ Mfg. costs incurred
for the period 835,000
= Total work in process

Quick Check  –
during the period
Ending work in
process inventory
$ 960,000

200,000
= Cost of goods
manufactured $ 760,000

Beginning work in process was $125,000.

Manufacturing costs incurred for the month
were $835,000. There were $200,000 of partially
finished goods remaining in work in process
inventory at the end of the month. What was
the cost of goods manufactured during the
month?
A. $1,160,000
B. $ 910,000
C. $ 760,000
D. Cannot be determined.
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Quick Check 
Beginning finished goods inventory was $130,000.
The cost of goods manufactured for the month
was $760,000. And the ending finished goods
inventory was $150,000. What was the cost of
goods sold for the month?
A. $ 20,000.
B. $740,000.
C. $780,000.
D. $760,000.

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Quick Check 
Beginning finished goods inventory was $130,000.
The cost of goods manufactured for the month
was $760,000. And the ending finished goods
inventory was $150,000. What was the cost of
goods sold for the month?
A. $ 20,000.
$130,000 + $760,000 = $890,000
B. $740,000. $890,000 - $150,000 = $740,000
C. $780,000.
D. $760,000.

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 COGS Statement?
The following data is available for ABC Manufacturing Company. For the year ended
Dec 31, 2009

Raw Material purchased Rs 1’946,700

Direct Labor Cost Rs 2’125,800
Factory Overhead Rs 764,000

Inventory Balance: Opening Bal Closing Bal

Raw Material Rs 268,000 Rs 167,000
W.I.P Rs 150,000 Rs 150,000
Finished Goods Rs 43,000 Rs 79,000

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 Income Statement ?
The following data is available for ABC Manufacturing Company. For the year ended
Dec 31, 2009

Raw Material purchased Rs 1’946,700

Direct Labor Cost Rs 2’125,800
Factory Overhead Rs 764,000
Marketing Expenses Rs 516,000
General and Administration Expenses Rs 461,000
Sales (12,400 Units) Rs 6’634,000

Inventory Balance: Opening Bal Closing Bal

Raw Material Rs 268,000 Rs 167,000
W.I.P Rs 150,000 Rs 150,000
Finished Goods Rs 43,000 Rs 79,000
Finished Goods (Refrigerator) 100 Units 200 Units

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Q#4 Income & Cost of Good Sold Statement
 Direct labor Cost & $ 30,000
 Cost Of Goods Sold $ 111,000
 Factory over head 150% of Direct Labor Cost
 Inventory Balance: Opening Bal Closing Bal

 Finished Goods 15,000 17,500

 Work in Process 9,600 13,000
 Material 7,000 7,400
 Other Data:
 Marketing Expense 14,100
 General & Admin Exp 22,900
 Sales For the period 182,000

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Q#7 Cost of Good Sold Statement
 Direct Material Used $ 193,000
 Cost Of Goods available for sales $ 684,000
 Total Manufacturing Cost $584,000
 Factory Over Head $167,000
 Inventory Balance: Opening Bal Closing Bal

 Finished Goods $110,000 $95,000

 Work in Process 70,000 80,000
 Material 90,000 95,000

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Prepare following statements;
COGS, Income Statement & Balance sheet
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Assessment Test

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Test -1
 Direct materials cost is Rs. 80,000. Direct labor
cost is Rs. 60,000. Factory overhead is Rs. 90,000.
Beginning goods in process were Rs. 15,000. The
cost of goods manufactured is Rs. 245,000. What
is the cost assigned to the ending goods in
process?

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Test -2
 A company has the following cost data for the month:
 Conversion cost: Rs. 78,900
 Prime Cost: Rs. 115,700
 Beginning Work in Process Inventory: Rs. 4,700
 Ending Work in Process Inventory: Rs. 2,800
 Beginning Finished Goods Inventory: Rs. 27,600
 Ending Finished Goods Inventory: Rs. 29,200
 Manufacturing Overhead Costs: Rs. 14,500
 What is the Cost of Goods Sold for the month?

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Test -3
 Total Manufacturing Cost $584,000
 Inventory Balance: Opening Bal Closing Bal
 Finished Goods $110,000 $95,000
 Work in Process 70,000 80,000

 Cost of Goods Manufacture = $ ?

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Test -4
 A firm had Rs. 200,000 in sales, Rs. 120,000 of
goods available for sale, an ending finished goods
inventory of Rs. 20,000. Selling and
Administrative expenses are Rs. 55,000. Which of
the following is true?
 Net income was 22.5% of sales
 The cost of goods sold was Rs. 100,000
 The gross profit was Rs. 100,000
 All of the given options

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COGS – Assessment - Example

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 “Material”
1-Purchase raw material on account for factory
Fact Material …………………………………………….. XXX
General Ledger ………………………..……………. XXX
HO- Factory Ledger …………………………………….. XXX
Account Payable………………………..……………. XXX

2-Transportation in /Freight in / Carriage in Paid on Purchase of Material.

Fact Transportation in / F.OH…........................................ XXX
General Ledger ………………………………….…. XXX
HO- Factory Ledger …....................................................... XXX
Cash …………………………………………………. XXX

3-issuance / Re-position of Material for Production (Direct / Indirect)

Fact Work in Process (Direct Material)……………….. XXX
Factory Overhead (Indirect Material)…………….. XXX
Material…………………………………… XXX

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4-Paymnet To vendor
“Material”
HO- Account Payable………………….……… XXX
Cash ……….…….…………………… XXX

5-Defective, damage or Inferior Quality returned to vendor or supplier of material.

Fact General Ledger ……..……………..…… XXX
Material ………….…………………… XXX
HO Account Payable …..……………..…… XXX
Factory Ledger…….…………………… XXX

6-Discount Received from Vendor (If HO get Discount)

HO Account Payable………………..……… XXX
Purchase Discount ……………………… XXX

6-Discount Received from Vendor (If discount Receive At Purchase time)

HO Account Payable………………..……… XXX
Factory Ledger ……………………… XXX
Fact General Ledger ……..……………..…… XXX
Purchase Discount.…………………… XXX

7-Un-Used Material returned to storeroom (Direct / Indirect)

Fact Material……………………………..…… XXX
Work in Process (Direct Material)…….. XXX
Factory Overhead (Indirect Material).. XXX
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1-Recording of payroll
“labour”
HO Payroll ………………………………………….. XXX
Employee Income Tax payable …………………….XXX
Provident Fund Or FICA……………..….……. XXX
Accrued Payroll ………………………..…..…. XXX

2-Payment Of Payroll.
HO Accrued Payroll …................................................ XXX
Cash ……………………………………………………XXX

3-Distribution of Payroll.
HO Factory Ledger (WiP & FOH)………..……… XXX
Administrative Exp ………………….……… XXX
Marketing Exp …………………………..……… XXX
Payroll………….………………………………………XXX
Fact Work in process………………………..……..……… XXX
FOH……………………….…………….,………………..….XXX
General Ledger ……………….……………...……………………XXX

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 “FOH”
1-FOH Charged to Production
Fact Work In Process ........................................................... XXX
FOH Applied ….……………..……………………. XXX

2-Power, Gas Electricity & Maint

Fact F.OH –Actual …........................................................... XXX
General Ledger …………………………………..……XXX
HO Factory Ledger………………………………………..XXX
Cash ………………….………………...........…….…. XXX

3-Annual Deprecation on Machinery .

Fact F.OH Actual ................................................................ XXX
General Ledger …………………..……………..……XXX
HO Factory Ledger……………………………..………..XXX
Accumulated Deprecation on Machinery ………. XXX

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 “FOH”
4-Insurance Expired.
Fact F.OH –Actual …............................................................XXX
General Ledger ……………………..………………………..……XXX
HO Factory Ledger………………………………………..XXX
Prepaid Insurance ………………………. ……………….…. XXX

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 “Good Complete & Sold”
1-Cost Transfer from WIP .
Fact Finished Goods ........................................................... XXX
Work in process …………….………….…….……. XXX

2- Goods Sold.
Fact General Ledger .......................................................... XXX
Finished Goods ..……………….……..….…………. XXX
HO Cost of Goods Sold ................................................. XXX
Factory Ledger ….………..….……………………. XXX

HO Cash / Account Receivable ........................................ XXX

Sale …………………………….………….…….……. XXX

3-Cash Collection
HO Cash .............................................................................. XXX
Account Receivable …………………….…….……. XXX

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 “Good Complete & Sold”
1-Cost Transfer from WIP .
Fact Finished Goods ........................................................... XXX
Work in process …………….………….…….……. XXX

2- Goods Sold.
Fact General Ledger .......................................................... XXX
Finished Goods ..……………….……..….…………. XXX
HO Cost of Goods Sold ................................................. XXX
Factory Ledger ….………..….……………………. XXX

HO Cash / Account Receivable ........................................ XXX

Sale …………………………….………….…….……. XXX

3-Cash Collection
HO Cash .............................................................................. XXX
Account Receivable …………………….…….……. XXX

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