1. 26 - 1
Manufacturing
Raw material
Direct Labor
Overhead
Administrative
Management
Sales Personnel
Administrative
Manufacturing costs must be separated from
all other selling and administrative costs.
2. 26 - 2
Learning Unit 26-1
Direct Materials:
Beginning inventory
+ Net purchases
– Ending inventory
= Direct material cost
Work-in-Process Inventory:
Beginning inventory
+ Direct material cost
+ Direct labor
+ Manufacturing overhead
= Total manufacturing costs
– Ending inventory
= Cost of goods manufactured
3. 26 - 3
Raw materials
used
WIP
Inventory
Finished
Goods
Inventory
Manufacturing
overhead
Direct labor
Cost of goods
sold
Learning Unit 26-1
4. 26 - 4
Beginning merchandise inventory
+ Net purchases
= Cost of merchandise available for sale
– Ending merchandise inventory
= Cost of goods sold
Merchandising Co.
Learning Unit 26-1
5. 26 - 5
Beginning finished goods inventory
+ Cost of goods manufactured
= Cost of goods available for sale
– Ending finished goods inventory
= Cost of goods sold
Manufacturing Co.
Learning Unit 26-1
7. 26 - 7
Learning Unit 26-2
Source documents provide proof of
transactions.
Receiving reports acknowledge receipt
of goods.
Material requisitions are requests for
materials from storage areas.
8. 26 - 8
Received from Adams Company
Receiving Report #1031 Date Received: 6/20/0x
Quantity Description Unit Price Total Price
50 Gals. Paint $6.50/Gallon $325.00
Inspected By______________________
Received By______________________
Receiving Report
9. 26 - 9
Materials Requisition Date: June 20, 200x
Number: 3648
From: Finishing Department
Quantity Description Unit Price Total Price
8Gal. White Paint $6.50/Gallon $52.00
Inspected By _______________________
Received By________________________
Materials Requisition
10. 26 - 10
Learning Unit 26-2
Clock cards list time worked for each
employee for specific activities.
Lot tickets reflect movement of products
through the manufacturing floor.
Labor distribution reports track the hours
and dollars of labor to departments and
products.
Bills of lading are shipping documents.
11. 26 - 11
Learning Unit 26-2
Flow charts illustrate the movement of the
material, labor, and overhead through the
operation.
They support journal entries.
Overhead – Control is debited as costs are
incurred.
Overhead – Applied is credited when
overhead is applied to products.
12. 26 - 12
Debit Work-in-Process Inventory
Credit Raw Material Inventory
Debit Work-in-Process Inventory
Credit Payroll
Debit Overhead – Control
Credit Supplies Inventory
Learning Unit 26-2
13. 26 - 13
Debit Overhead – Control
Credit Payroll
Debit Overhead – Control
Credit Supervision Salaries
Rent Expense
Depreciation Expense
Electricity Expense
Learning Unit 26-2
14. 26 - 14
Debit Work-in-Process Inventory
Credit Overhead – Applied
Debit Finished Goods Inventory
Credit Work-in-Process Inventory
Debit Cost of Goods Sold
Credit Finished Goods Inventory
Learning Unit 26-2
15. 26 - 15
Preparing a worksheet
for a manufacturing company.
Learning Objective 3
16. 26 - 16
Learning Unit 26-3
The worksheet for a manufacturing
company is used to produce the following:
– Statement of cost of goods manufactured
– Income statement
– Statement of retained earnings
– Balance sheet
17. 26 - 17
Statement of
Retained Earnings
Balance
Sheet
Cost of
Trial Adjust. Goods Income Balance
Balance Manufactured Statement Sheet
Income
Statement
Statement of Cost of
Goods Manufactured
Learning Unit 26-3
