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Ch2 - Income Statements

# Ch2 - Income Statements - Prepare income statements for...

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1 Prepare income statements for manufacturing and service organizations.

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2 Cost of Goods Manufactured + Overhead Direct Materials + Direct Labor Total product cost of goods completed during the current period Sounds simple enough. But there’s more to it than meets the eye.
3 Direct Materials Used Only the amount used on products produced during the current period Consider beginning and ending inventory levels Key point: Purchases do not equal Materials Used

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HOW TO Calculate the Direct Materials Used in Production
5 Example Information: BlueDenim Company makes blue jeans. On May 1, BlueDenim had \$68,000 of materials in inventory. During the month of May, the company purchased \$210,000 of materials. On May 31, materials inventory equaled \$22,000.

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6 Example Required: Calculate the direct materials used in production for the month of May
7 Direct Materials Beginning Materials Inventory + Purchases - Ending Materials Inventory = Materials Used in Production \$68,000 \$210,000 \$22,000 - + = \$256,000

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8 Work in Process Let’s continue our example Second type of inventory Cost of partially completed goods that are still
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Ch2 - Income Statements - Prepare income statements for...

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