Computing Cost of Manufactured and Sold Goods

Compute the cost of goods manufactured and cost of goods sold for Strike Marine Company for the most recent year using the amounts described below. Assume that raw materials inventory contains only direct materials.

Beginning of End of End of

Year Year Year

Raw materials inventory

$25,000

$28,000

Insurance on plant

$9,000

Work in process inventory

$50,000

$35,000

Depreciation plant building and equipment

$13,000

Finished goods inventory

$18,000

$25,000

Repairs and maintenance

$4,000

Purchases of direct materials

$78,000

Marketing expenses

$77,000

Direct labor

$82,000

General and administrative expenses

$29,000

Indirect labor

$15,000

Cost of Goods Manufactured $ 213,000

Cost of Goods Sold $ 206,000

Explanation:

If we add and subtract the following amounts in the correct order we get the Cost of Goods Manufactured and Sold Statement.

Strike Marine Company

Cost of Goods Manufactured and Sold Statement

Raw materials inventory Beginning $25,000

Add Purchases of direct materials $78,000

Less Raw materials inventory Ending $28,000

Direct Materials Used $ 75000

Direct labor $82,000

Manufacturing Overheads $ 41,000

Insurance on plant $9,000

Depreciation plant building and equipment $13,000

Indirect labor $15,000

Repairs and maintenance $4,000

Total Manufacturing Costs 198,000

Add Work in process inventory Beginning $50,000

Cost of Goods Available for Manufacture $ 248,000

Less Work in process inventory Ending $35,000

Cost of Goods Manufactured $ 213,000

Add Finished goods inventory Beginning $18,000

Cost of Goods Available for Sale 231,000

Less Finished goods inventory Ending $25,000

Cost of Goods Sold $ 206,000

The Manufacturing Overheads includes all the indirect expenses related to the manufacture of the product such as the indirect labor, the insurance and depreciation of plant and also the repairs.

The following are operating expense and included in the income statement not in the Cost of Goods Manufactured and Sold Statement. These relate to marketing and selling department.

Marketing expenses $77,000

General and administrative expenses $29,000