Flow of Costs and Journal Entries

• Flow of Inventory through the Manufacturing System

  raw materials inventory

  work in process inventory

  finished goods inventory

  cost of good sold
• Raw Materials Inventory 


  is the cost of raw materials
• Work in Process inventory 


  products is the middle of being finished

  DM, DL, OH applied
• Finished Goods Inventory 


  finished products that have not been sold
• Cost of Goods Sold


  expense on the income statement
• Assets on Balance Sheet

  its raw materials inventory, work in process inventory, and finished goods inventory
• Calculation of GOCS for a Manufacturer 3 steps

  calculate direct materials used in production

  calculate the cost of goods manufactured

  calculate cost of goods sold
• Direct Materials Used in Production

  beginning raw materials inventory

  + purchases of raw inventory

  -ending raw materials inventory

  _______________________

  raw materials used in production

  -indirect materials used in production

  _________________________

  Direct Materials Used in Production
• Cost Of Goods Manufactured

  beginning Work In Process Inventory

  + direct materials used in production

  + direct labor

  + manufacturing overhead applied

  -ending work in process inventory

  __________________________

  Cost of Goods Manufactured
• Cost of Goods Sold

  beginning finished goods inventory

  + cost of goods manufactured

  -ending finished goods inventory

  _________________________

  Unadjusted Cost Of Goods Sold
• purchased $75,00 in raw materials on account

  raw materials inventory $75,000

  accounts payable $75,000
• materials requisition were prepared to authorize withdrawing $73,000 in raw materials from the storeroom for use in production, $65,000 was for direct materials and $8,000 was for indirect materials

  work in process inventory $65,000

  manufacturing overhead $8,000

  raw materials $73000
• the employee time tickets included $85,000 recorded for direct labor and $12,000 for indirect labor

  work in process inventory $85,000

  manufacturing overhead $12,000

  salaries and wages payable $97,200
• $112,000 in manufacturing overhead costs which includes $28,000 for rent (paid in cash), $15,00 for utilities (on account), $18,800 depreciation, and $50,200 for the miscellaneous overhead cost (on account)

  manufacturing overhead $112,000

  cash $28,000

  accounts payable $65,200

  accumulated depreciation $18,800
• used a predetermined overhead rate of $20/direct labor house. 4,900 direct labor hours were worked

  $20/ DL hr x 4,900 DL hrs =$98,000 Oh applied

  work in process inventory $98,000

  manufacturing overhead $98,000
• MOH applied < Actual MOH

  MOH is underapplied
• When MOH is underapplied MOH has a

  debit balance
• MOH applied > Actual MOH

  MOH has been overapplied
• When MOH is overapplied MOH has been

  credit balance
• to close out an underapplied MOH you need to

  debit cost of goods sold

  credit MOH
• to close out an overapplied MOH account you need to

  debit MOH

  credit cost of goods sold
• $260,000 incurred in selling and administrate costs, on account

  selling and administrative $260,000 (debit)

  accounts payable $260,000 (credit)
• Job 1014 was completed. total cost of the job totaled $42,500

  finished good inventory $42,5000 (debit)

  work in process inventory $42,500 (credit)
• Job 102 was sold. The total cost of the job totaled $26,000 and it was sold for $38,000. All sales are on account

  accounts receivable $38,000 (debit)

  sales receivable $38,000 (credit)

  cost of goods sold $26,000 (debit)

  finished goods inventory $26,000 (credit)