managerial accounting

1. Lecture by;
Muhammad Furqan
Lecturer ̶ Finance & Accounting
Managerial Accounting
1
BBA 5th Semester
Section (D)

2. MANAGEMENT REPORTING
1. Cost of Goods Sold Statement.
2. Income Statement.
3. Balance Sheet.
Lecture Outlines ̶ Week # 02
2 Muhammad Furqan (Lecturer-Finance & Accounting)

3. 3
The financial statements prepared by a
manufacturing company are more complex than the
statements prepared by a merchandising company
because a manufacturing company must produce its
goods as well as market them.
The production process involves many costs that do
not exist in a merchandising company, and
These costs must be properly accounted for on the
manufacturing company’s financial statements.
Financial Statements

4. 4
 The balance sheet, or statement of financial position,
of a manufacturing company is similar to that of a
merchandising company. However, their inventory
accounts differ.
 A merchandising company has only one class of
inventory—goods purchased from suppliers for
resale to customers.
 In contrast, manufacturing companies have three
classes of inventories—
1. Raw materials,
2. Work in process, and
3. Finished goods.
Financial Statements

5. 5
Raw Materials are the materials that are used to
make a product.
Work in process consists of units of product that are
only partially complete and will require further work
before they are ready for sale to a customer.
Finished goods consist of completed units of
product that have not yet been sold to customers.
Ordinarily, the sum total of these three categories of
inventories is the only amount shown on the balance
sheet in external reports. However, the footnotes to
the financial statements often provide more detail.
Financial Statements

6. Financial Statements of
Service, Retail, and Manufacturing Organizations

7. Financial Statements of
Service, Retail, and Manufacturing Organizations

8. Financial Statements of
Service, Retail, and Manufacturing Organizations

9. 9

10. 10
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . $140,000
Raw materials inventory, January 1 . . . . . . . . . . . $90,000
Raw materials inventory, December 31 . . . . . . . . $60,000
Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
Purchases of raw materials . . . . . . . . . . . . . . . . . $750,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,500,000
Administrative expenses . . . . . . . . . . . . . . . . . . . $270,000
Manufacturing overhead . . . . . . . . . . . . . . . . . . . $640,000
Work in process inventory, January 1 . . . . . . . . . $180,000
Work in process inventory, December 31 . . . . . . $100,000
Finished goods inventory, January 1 . . . . . . . . . . $260,000
Finished goods inventory, December 31 . . . . . . . $210,000
Required:
1. Prepare a schedule of cost of goods manufactured. Assume raw
materials consists entirely of direct materials.
2. Compute the cost of goods sold.
3. Prepare an income statement.
Exercise # 01

11. 11
Solution (Exercise # 01)

12. 12
Solution (Exercise # 01)

13. 13
Lompac Products manufactures a variety of products in its
factory. Data for the most recent month’s operations appear
below:
Beginning raw materials inventory . . . . . . . . . . . . .$ 60,000
Purchases of raw materials . . . . . . . . . . . . . . . . . . $ 690,000
Ending raw materials inventory . . . . . . . . . . . . . . . $ 45,000
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 135,000
Manufacturing overhead . . . . . . . . . . . . . . . . . . . . $ 370,000
Beginning work in process inventory . . . . . . . . . . . $120,000
Ending work in process inventory . . . . . . . . . . . . . $ 130,000
Required:
Prepare a schedule of cost of goods manufactured for the company
for the month.
Exercise # 02

14. 14
Calculate the Manufacturing Cost, Costs of Goods Manufactured and
Cost of Goods Sold, The December 31st 2021, trial balance of the
BALKWELL Company showed.
Sales………………..$ 40,0500 Sales return and Allowances……….$ 25,200
Purchases…............$ 24,00,000 Transportation in…………………..…$ 32,000
Direct Labor…. …...$ 32,04,000 Factory Overhead…..………….……$18,85,600
Sales Salaries……..$ 200,000 Advertising expense….………..……$1,55,000
Delivery expenses…………………...$ 65,000
INVENTORIES: 31st - Dec, 2021 1st - January, 2021
Finished Goods……………………… $467400 $ 620000
Work In Process…………………….. $136800 $ 129800
Materials…………………………….. $196000 $ 176000
REQUIRED: Calculate the following
1. Total Manufacturing cost.
2. Cost of Goods Manufactured.
3. Cost of Goods Sold
4. Income Statement
Exercise # 03

15. 15
The End of Week # 2