Chapter 2 Notes

Chapter 2 Notes - COST CLASSIFICATIONS IN MANUFACTURING...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: COST CLASSIFICATIONS IN MANUFACTURING COMPANIES COST FLOWS IN A MANUFACTURING COMPANY COST FLOWS EXAMPLE EXAMPLE: Ryarder Company incurred the following costs last month: Purchases of raw materials........... $200,000 Direct labor.................................... $270,000 Manufacturing overhead: Indirect materials........................ $ 5,000 Indirect labor............................... 100,000 Utilities, factory........................... 80,000 Property taxes, factory................ 36,000 Insurance, factory....................... 9,000 Equipment rental......................... 70,000 Depreciation, factory................... 120,000 Total manufacturing overhead....... $420,000 But: Some of the goods sold this month were produced in previous months. Some of the costs listed above were incurred to make goods that were not sold this month. Therefore: Cost of goods sold does not equal the sum of the above costs. We need to determine the values of the various inventories. COST FLOWS EXAMPLE (continued) Additional data for Ryarder Company: Raw materials inventory: Beginning raw materials inventory............... $10,000 Purchases of raw materials.......................... $200,000 Ending raw materials inventory.................... $30,000 Raw materials used in production................ ? Work in process inventory: Beginning work in process inventory............ $40,000 Total manufacturing costs............................ ? Ending work in process inventory................ $60,000 Cost of goods manufactured (i.e., finished). ? Finished goods inventory: Beginning finished goods inventory............. $130,000 Cost of goods manufactured (i.e., finished). ? Ending finished goods inventory.................. $80,000 Cost of goods sold....................................... ? INVENTORY FLOWS Basic Equation for Inventory Accounts: or COST FLOWS EXAMPLE (continued) Computation of raw materials used in production Beginning raw materials inventory.................. $ 10,000 + Purchases of raw materials............................ 200,000 Ending raw materials inventory....................... 30,000 = Raw materials used in production................... $180,000 Computation of total manufacturing cost Raw materials used in production................... $180,000 + Direct labor..................................................... 270,000 + Manufacturing overhead................................. 420,000 = Total manufacturing cost................................. $870,000 Computation of cost of goods manufactured...
View Full Document

This document was uploaded on 10/26/2011 for the course ACC 222 at Miami University.

Page1 / 16

Chapter 2 Notes - COST CLASSIFICATIONS IN MANUFACTURING...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online