TOPIC 8 WEEK 11

ACCOUNTING FOR
MANUFACTURING
BUSINESS

COMPILED BY:
DAISY B. MEDINA-CRUZ, CPA, MBA
• BEFORE PROCEEDING TO MANUFACTURING
ACCOUNTING, LET US FIRST DISCUSS
RECONSTRUCTION OF INCOME STATEMENT
Reconstructing the income statement using
percentage – a given income statement is as follows:
Sales 50,000 (100%)
Less Cost of Sales 32,500 ( 65%)
Gross Profit 17,500 (35%)
Less Operating Expenses _7,500 (15%)
Net Income 10,000 ( 20%)
======
Take note that Sales = 100% consisting of COS and GP
GP percentage consists of Opex and Net Income
NET SALES AMOUNTED TO P70,000 WITH COST OF SALES
REPRESENTING 70% . IF OPERATING EXPENSES IS 12% OF
Sales
SALES, HOW MUCH IS THE NET INCOME AND IT’S
70,000 (100%)
PERCENTAGE?
Less Cost of Sales 49,000
( 70%)
Gross Profit
21,000 (30%)
Less Operating Expenses 8,400 (12%)
Net Income 12,600
?
A COMPANY REPORTED A NET LOSS OF P20,000. IF ITS
SalesSALES WAS P100,000 AND GROSS PROFIT WAS 30%
NET
OF SALES, HOW MUCH
100,000 (100%) IS THE OPERATING EXPENSES?

Less Cost of Sales

Gross Profit
? (30%)
Less Operating Expenses ?__
Net Income (loss) (20,000)
A COMPANY REPORTED A NET LOSS OF P20,000. IF ITS
SalesSALES WAS P100,000 AND GROSS PROFIT WAS 30%
NET
OF SALES, HOW MUCH
100,000 (100%) IS THE OPERATING EXPENSES?

Less Cost of Sales

Gross Profit
30,000 (30%)
Less Operating Expenses ?__
Net Income (loss) (20,000)
A COMPANY REPORTED A NET LOSS OF P20,000. IF ITS
SalesSALES WAS P100,000 AND GROSS PROFIT WAS 30%
NET
OF SALES, HOW MUCH
100,000 (100%) IS THE OPERATING EXPENSES?

Less Cost of Sales

Gross Profit
30,000 (30%)
Less Operating Expenses 50,000
Net Income (loss) (20,000)
TALUNAN COMPANY REPORTED A NET LOSS OF P35,000. IF
ITS NET SALES WAS P150,000 AND GROSS PROFIT WAS 40%
OF SALES, HOW MUCH IS THE OPERATING EXPENSES?

Sales
150,000
Less Cost of Sales
Gross Profit ?
40%
Less Operating Expenses ?
Net Income (loss) ( 35,000)
=======
Talunan company reported a net loss of P35,000. If its net sales was P150,000
and gross profit was 40% of sales, how much is the operating expenses?
Compute the Gross Profit first.

Sales
150,000
Less Cost of Sales
Gross Profit 60,000
40%
Less Operating Expenses ?
Net Income (loss) ( 35,000)
=======
Since it is a loss add the Gross Profit and the Net loss to get
the Operating Expense.

Sales 150,000
Less Cost of Sales 90,000
Gross Profit 60,000 40%
Less Operating Expenses 95,000
Net Income (loss) ( 35,000)
=======
LET US PRACTICE MORE - 1 POINT INCENTIVE ADDED TO THE
FORTHCOMING QUIZ FOR THE FIRST TO MESSAGE THE CORRECT
ANSWER.

1. Why Me Ent. reported a gross profit 35% amounting to

P26,250. If the operating expenses is 20%, how much is
total Sales and the net income? 2 points
2. If the company’s operating expenses is P34,275, Sales is
P63,125 and it’s cost of sales is 65%, how much is the
net income (loss)? 1 point
3. Rush Sales has a net loss of P11,275. If Sales is P43,250
and the gross profit is 40%, how much is the cost of sales
and operating expenses? 2 points
Why Me Ent. reported a gross profit 35% amounting to P26,250. If the
operating expenses is 20%, how much is total Sales and the net income?

Sales 75,000 100%

Less Cost of Sales
Gross Profit 26,250 35%
Less Operating Expenses 15,000 20%
Net Income (loss) 11,250
15%
=======
If the company’s operating expenses is P34,275, Sales is
P63,125 and it’s cost of sales is 65%, how much is the net
income (loss)?

Sales 63,125
Less Cost of Sales 41,031.25 65%
Gross Profit 22,093.75 35%
Less Operating Expenses 34,275.00
Net Income (loss) ( 12,181.25)
==========
Rush Sales has a net loss of P11,275. If Sales is P43,250 and
the gross profit is 40%, how much is the cost of sales and
operating expenses? 2 points

Sales 43,250
Less Cost of Sales 25,950 60%
Gross Profit 17,300 40%
Less Operating Expenses 28,575
Net Income (loss) ( 11,275)
=======
LEARNING OUTCOMES

• Prepare basic journal entries for

manufacturing operations.
• » Prepare income statement of a
manufacturing business including
statement of cost of goods
manufactured.
 TOPICS: ACCOUNTING FOR MANUFACTURING BUSINESS
• 1. Operating cycle for manufacturing entities
• 2. Income statement for manufacturing entities
3. Recording transactions for manufacturing
business
• - Purchase and issuance of raw material
• - Incurrence of direct labor
• - Incurrence of factory overhead
• - Other expenses
 WHAT IS A MANUFACTURING BUSINESS

A manufacturing business buys raw materials and changes

them into finished products to make them ready for sale.
• Examples:
• Shoes/bags factory in Marikina which buys finished
leather from Bulacan and processes this into shoes and
bags before selling them.
• Furniture factory which buys various woods and materials
and transform these woods into different kinds of
furniture for sale at their shop.
COMPARISON OF MANUFACTURING AND MERCHANDISING BUSINESS

Manufacturer
• Merchandiser
1. Buys raw materials • 1. buys goods or
merchandise
2. Transform these into
finished products • 2. sells without
changing the form
3. Sells these finished
products
 OPERATING CYCLE FOR MANUFACTURING
ENTITIES
• The operating cycle of a manufacturing company
involves three phases:
• 1. Acquisition of resources such as raw materials,
labour, power and fuel etc.
• 2. Manufacture of the product which includes
conversion of raw material into work-in-progress
into finished goods.
• 3. Sale of the product either for cash or on credit.
 VARIOUS INVENTORIES OF MANUFACTURING
BUSINESS
Four kinds of inventory of manufacturing
business:
1. Raw materials inventory – represents
materials needed to make the product
such as wood for furniture, leather for
shoes, and textile for clothes.
VARIOUS INVENTORIES OF MANUFACTURING
BUSINESS

2. Work in process inventory – represents

goods still in process of manufacturing.
3. Finished goods inventory – represents the
finished product ready for sale to
wholesalers or retailers.
VARIOUS INVENTORIES OF MANUFACTURING
BUSINESS

4. Factory supplies inventory – consists

of materials use in the factory but not
necessarily forming an integral part of
the finished products such as
detergents, grease, oil, varnish, nail and
sandpaper.
FACTORS CONSIDERED IN PUTTING UP A
MANUFACTURING BUSINESS
• Plant site
• Machineries
• Raw materials
• Large manpower force
• Large sum of capital
THREE ELEMENTS OF COST TO MANUFACTURE (PRODUCT COSTS):

1. Direct materials- materials that forms an

integral part of the product. Examples-leather in
making shoes, bags and belts, wood in making
furniture. Can you give more examples?
2. Direct labor – the compensation paid for
workers, directly involve in making the product.
Examples – wages of shoemakers, machinists and
assemblers.
3. Manufacturing expenses or factory overhead – the
expenses incurred in the factory other than the direct
materials and direct labor.
• Called indirect costs of a product or non-traceable
costs since it is difficult to trace them to the product.
Examples-indirect materials, supplies, power, water
and communication, indirect labor, repairs and
maintenance, depreciation, insurance, rent and
supervision.
SEATWORK: IDENTIFY THE COST ELEMENT INVOLVED IN EACH OF THE FOLLOWING:

DM Direct Materials DL Direct Labor FO Factory overhead

1. Fruit for ice cream 2. Tools used
3. Wages of supervisor 4. Wages of cutter
5. Oil for machines 6. Meat for corned
beef
7. Heat, light and water 8. Sugar for ice cream
9. Dry ice for packing 10. Perfume bottles
DM Direct Materials DL Direct Labor FO Factory overhead
11. Animal skin for bags 12. Wages of machinists
13. Leather for shoes 14. Indirect labor
15. Wages of assemblers 16. Insurance
17. Communication 18. Wood for
furniture
19. Milk for cheese 20. Wages of cutters
PRODUCTION COST (COST TO MANUFACTURE)
• Prime costs – direct materials and direct
labor
• Conversion costs – direct labor and factory
overhead
• Product costs computed by adding
• prime costs + factory overhead
• Conversion costs + direct materials
Computing unit cost – Assume that a manufacturing
company was able to produce 4,000 units of product,
the total production cost and unit cost are as follow:
Direct Materials ( assumed figure) P250,000
Direct Labor (assumed figure) 390,000
Manufacturing expenses @ P40 160,000
Total Production cost P800,000
========
Unit cost (P800,000/4,000) P 200
========
PERIOD COSTS– Incurred Based On The Passage Of Time Rather Than
Based On The Manufacturing Activity Of The Firm

• Distribution and administrative costs and expenses

• Distribution costs-necessary to promote and distribute
the products
• Freight Advertising
• Sales salaries Sales commission
• Store supplies
• Depreciation e.g. delivery trucks
• Repairs and maintenance e.g. delivery trucks
 PERIOD COSTS– Incurred Based On The Passage Of Time Rather
Than Based On The Manufacturing Activity Of The Firm

• Administrative expenses – necessary for the

general administration of the firm
• Office salaries
• Insurance
• Taxes and licenses
• Depreciation of office equipment
• Repairs and maintenance of office equipment
IMPORTANCE OF IDENTIFYING PRODUCT COSTS AND
PERIOD COSTS

• Product costs (which represents the finished products)

are presented in the statement of financial position until
these are sold. Once sold, these are transferred to the
income statement as cost of goods sold.

• Period costs are recognized in the income statement

once incurred.
 SALES PRICE

• Consists of the cost plus mark-up Example :

Cost is P200 + 100% mark-up, therefore Selling
price = P400
• Be sure that mark up rate is large enough to
absorb the operating expenses to earn an
adequate profit.
respectively, the income statement will be shown as:
Sales (4,000 units x P400)
P1,600,000
Cost of goods sold (4,000 units xP200 ) 800,000
50%
Gross Income
P 800,000 50%
Less Operating Expenses
Selling P250,000
Administrative 150,000
400,000 25%
Net Income
 800,000
FULL COST PRICING METHOD - Selling Price Is Computed
BasedSelling
On Total Cost
expenses
250,000
Administrative expenses
150,000
Total cost
P1,200,000 (P300/unit)
Mark-up (50% of P1,200,000)
600,000
Total Sales
P1,800,000/4,000 units
 Assuming all the 4,000 units are sold, the income statement
will show:
• Sales (P450 x 4,000 units) P1,800,000
Less cost of goods sold (P200 x 4,000) 800,000

Gross profit P1,000,000

Less operating expenses
Selling P250,000
Administrative 150,000 400,000

Net income P 600,000

==========
Sales (P450 x 3,000 units)
P1,350,000
Assume that only 3,000 units are sold, the income statement will show:

Less cost of goods sold (P200 x 3,000) 600,000

Gross profit
P 750,000
Less operating expenses
Selling P250,000
Administrative 150,000
400,000
Net income
P 350,000 26%
==========
Raw materials used is based on units of measurement e.g. yard
or meter for cloth, liter for milk, square foot for lumber or
leather .
• Example, to determine the cost of RM, the production
manager will give a material requirement e.g. square foot
of RM which will yield 2 products.
• Thus if a raw material is P135 per square foot, then a unit of
product will use up P67.50 (P135/2) of raw material
multiplied by 4,000 units = P270,000
• Stated another way, it will require 2,000 sq. foot of RM to
produce 4,000 units, thus 2,000 x P135)
• Direct labor is based on the number of workers needed
to run a factory and the labor rate of each worker.
• Ex. A factory hired 50 workers at a per day rate of
P680 to work six days a week. The total monthly
salaries = 50 x P680 x 24 (days) = P816,000.
• Manufacturing expenses such as supervision, rent,
machine maintenance, factory insurance are
accumulated based on a contract usually on a monthly
basis.
 ALLOCATED OR COMMON COSTS
• Direct costs of a department – costs incurred by
a particular department.
• Manufacturing department-manufacturing
costs, machine repairs
• Sales department – selling costs, sales
commission
• Administrative department – administrative
or general costs, office supplies
 ALLOCATED OR COMMON COSTS

• Common costs or indirect costs or allocated costs – costs

that cannot be identified or traced to a particular
department and are incurred in general by the company.
• To allocate this cost - the one that has a direct bearing
to the incurrence of such cost by all the departments
concerned such as floor space to allocate rent and
depreciation, number of equipment using electricity to
allocate power, number of telephone units and number
of calls to allocate telephone expenses
• The following are some of the costs and expenses incurred by Quality Corporation for the month
of March:
ILLUSTRATION OF ALLOCATING COSTS

Factory Sales Dept. Admin. Dept.

Direct Materials Direct cost P125,000
Direct Labor Direct cost 75,000
Salaries expense Direct cost
P60,000 P200,000
Supervision Direct cost 80,000
Power P140,000 (refer to Note 1) 112,000 14,000
14,000
Communication 9,000 (refer to Note 2) 1,800 4,320
2,880
Building Maintenance 15,000 (refer to Note 3) 7,500 2,500
5,000
Delivery cost Direct cost
4,500
 THE INDIRECT COSTS WERE ALLOCATED IN THIS MANNER

1) Based on kilowatt hours such as 8,000 for factory, 1,000

for sales and 1,000 for administrative. Thus, 140,000
x8,000/10,000 = P112,000; 1,000/10,000x 140,000=14,000
2) Based on number of calls such as 50 for factory, 120 for
sales and 80 for administrative. Thus, P9,000 x 50/250 =
P1,800.
3) Based on square foot such as 300 for factory, 100 for sales
and 200 for administrative.=600 square foot
4) Based on square foot also. Thus, 3/6 x 60,000 = 30,000.
ILLUSTRATION OF ALLOCATING COSTS
The following are some of the costs and expenses incurred by Quality
Corporation for the month of March:

Factory Sales Dept. Admin. Dept.

Power P140,000 (refer to Note 1)
kilowatt hours used 10,000 to
be allocated as:
8,000/10,000 x P140,000 P112,000
1,000/10,000 x P140,000
P14,000
1,000/10,000xP140,000
P 14,000
ILLUSTRATION OF ALLOCATING COSTS
Factory
Sales Dept. Admin. Dept.
Communication
P9,000 (refer to Note 2)
Allocated based on the number
of calls = total calls 250
50/250 x P9,000 P1,800
120/250 x P9,000
P4,320
80/250 x P9,000
P2,880
ILLUSTRATION OF ALLOCATING COSTS
Factory Sales Dept. Admin. Dept.

Building Maintenance P15,000

(Note 3-based on square foot)
300/600 x P15,000 P 7,500
100/600 x P15,000
P2,500
200/600 x P15,000
P5,000
Rent 60,000 (refer to Note 4-
Based on square foot, too) 30,000 10,000
 ASSIGNMENT FOR NEXT MEETING - EXERCISE 2
PAGE 387

• The Following Accounts Are Found In The Ledger Of

Bataan Leather Factory:
Identify The Direct Costs Of The Manufacturing
Department (MD), Distribution Department (DD)
And Administrative Department (AD).
What Costs Are Common To All Departments? How
Will These Costs Be Allocated?
-• Depreciation of machinery
• Bad debts
• Power expense
• Building insurance expense
• Factory repairs
• Legal expenses
• Freight out
• Advertising expense
• Depreciation of building
• Freight in
• Sales commission
• Office supplies used
• Delivery truck - insurance expense
• Janitorial services
• Depreciation of office equipment
• Factory supervisor’s salary
• Representation of the company president
• Factory supplies used
• Water expense
 ASSIGNMENT FOR NEXT MEETING - EXERCISE 2
PAGE 387

• The Following Accounts Are Found In The Ledger Of

Bataan Leather Factory:
Identify The Direct Costs Of The Manufacturing
Department (MD), Distribution Department (DD)
And Administrative Department (AD).
What Costs Are Common To All Departments? How
Will These Costs Be Allocated?
-• Depreciation of machinery - MD
• Bad debts - AD
• Power expense – MD, DD, AD - KILOWATT
• Building insurance expense – MD, DD, AD – SQUARE FOOT
• Factory repairs - MD
• Legal expenses - AD
• Freight out - na
• Advertising expense - DD
• Depreciation of building – MD, DD, AD - SQUARE FOOT
• Freight in - MD
• Sales commission - DD
• Office supplies used - AD
• Delivery truck - insurance expense - DD
• Janitorial services – MD, DD, AD – SQUARE ROOT
• Depreciation of office equipment - AD
• Factory supervisor’s salary - MD
• Representation of the company president - AD
• Factory supplies used - MD
• Water expense – MD, DD, AD - CUM
 COST OF GOODS MANUFACTURED AND
SOLD
• Major difference between manufacturing and merchandising business is the
computation and presentation of COST OF GOODS SOLD.
• FOR MANUFACTURING the Income Statement, the presentation is:
Finished Goods Inventory, Beginning P 50,000.00
Add Cost of Goods Manufactured ( see schedule) 35,000.00
Total Goods Available for Sale P 85,000.00
Less Finished Goods Inventory, End 25,000.00
Cost of Goods Sold P 60,000.00

==========
 SCHEDULE OF COST OF GOODS MANUFACTURED
Raw Materials Inventory, Beginning P XXX
Add Net Cost of Materials Purchases XXX
Total Materials Available for Use P XXX
Less Raw Materials Inventory, End XXX
Raw Materials Used/Direct Materials P XXX
Direct Labor XXX
Manufacturing Expenses ( in detail) XXX
Total Manufacturing Costs/Total Product Costs P XXX
Add Work in Process Inventory, Beginning XXX
Total Work Placed in Process P XXX
Less Work in Process Inventory, End XXX
Cost of Goods Manufactured PXX,XXX
========
 PRO-FORMA FOR THE COMPUTATION OF DIRECT MATERIALS
USED

Raw materials inventory, beginning xx,xxx

Add Net Cost of Purchases
Raw materials purchases xx,xxx
Freight in xxx
Total cost of raw materials delivered xx,xxx
Less Purchases Returns and Allowances xxx
Purchases Discount xxx xxx
Net cost of purchases xx,xxx
Total Materials Available for Use xx,xxx
Less Raw materials inventory, ending xx,xxx
Cost of direct materials used xx,xxx
 FLOW OF COST
Raw Materials Inventory, Beginning xxx,xxx
Add Net Cost of Purchases xxx,xxx
Total Materials Available for Use
xxx,xxx
Less Raw Materials Inventory, End xxx,xxx
Raw Materials Used xxx,xxx
Add Direct Labor xxx,xxx
Manufacturing Overhead(breakdown) xxx,xxx
Total Manufacturing Costs xxx,xxx
Total Manufacturing Costs xxx,xxx
Add Work-in Process Beginning xxx,xxx
Total Work Placed in Process xxx,xxx
Less Work-in Process, End xxx,xxx
Cost of Goods Manufactured xxx,xxx
=======
Cost of Goods Manufactured
xxx,xxx
Add Finished Goods, Beginning
xxx,xxx
Cost of Goods Available for Sale
xxx,xxx
Less Finished Goods Inventory, End xxx,xxx
Cost of Goods Sold
xxx,xxx
==============
 ILLUSTRATIVE PROBLEM

Data for the materials inventory for the month ended August 31, 2022 are as follows:
• Raw materials inventory, Aug 1, 2022 P20,750
• Raw materials purchases 20,500
• Freight in of Raw materials purchases 475
• Factory Supplies used 600
• Purchases Returns and allowances 500
• Purchase Discounts 200
• Compute the cost of direct materials used for August if the count in the storeroom
yielded P15,900 raw materials on August 31.
 COMPUTATION OF DIRECT MATERIALS USED

Raw materials inventory, beginning 20,750

Add Net Cost of Purchases
Raw materials purchases 20,500
Freight in 475
Total cost of raw materials delivered 20,975
Less Purchases Returns and Allowances 500
Purchases Discount 200 700
Net cost of purchases 20,275
Total Materials Available for Use 41,025
Less Raw materials inventory, ending 15,900
Cost of direct materials used 25,125
TIME FOR YOU TO PRACTICE DETERMINING
DIRECT MATERIALS USED
SEATWORK: DATA FOR THE MATERIALS INVENTORY FOR THE MONTH ENDED SEPTEMBER 30, 2023 ARE AS FOLLOWS:

• Raw materials inventory, Sept. 1, 2023 P33,750

• Raw materials purchases
35,500
• Freight in of Raw materials purchases 475
• Factory Supplies used 600
• Purchases Returns and allowances 450
• Purchase Discounts
275
• Compute the cost of direct materials used for September if the count in
the storeroom yielded P17,250 raw materials on September 30.
 COMPUTATION OF DIRECT MATERIALS USED

Raw materials inventory, beginning 33,750

Add Net Cost of Purchase
Raw materials purchases 35,500
Freight in 475
Total cost of raw materials delivered 35,975
Less Purchases Returns and Allowances 450
Purchases Discount 275 725
Net cost of purchases 35,250
Total Materials Available for Use 69,000
Less Raw materials inventory, ending 17,250
Cost of direct materials used 51,750
======
MORE EXERCISES
ILLUSTRATIVE CASE 2

• Use the formula as illustrated.

• Requirements
• Cost of direct materials used
• Cost of goods manufactured
• Cost of goods sold
• Net income
 EXERCISE 4 PAGE 388
• The Showroom Manufacturing Company indicated that
the following inventories in its recent statement of
financial position:
• For the year ended
• 2022 2021
• Raw Materials P 33,700 P36,500
• Work in process 74,450 83,750
• Finished Goods 21,900 25,450
• Additional information for the year 2022 shows that:
• Sales
P280,000
• Direct labor
45,000
• Total manufacturing costs incurred 241,300
• Raw material purchases 50,000
• Operating expenses 14,600
•
• Required: Compute for the cost of direct materials used, cost of
goods manufactured, cost of goods sold and net income for 2022.
 SHOWROOM MANUFACTURING COMPANY
DIRECT MATERIALS USED
FOR THE YEAR 2022

Raw materials inventory, beginning 36,500

Add Net Cost of Purchase
Raw materials purchases 50,000
Total Materials Available for Use 86,500
Less Raw materials inventory, ending 33,700

Cost of direct materials used

•
52,800 ===============================
•
THE SHOWROOM MANUFACTURING COMPANY INDICATED THAT THE FOLLOWING
INVENTORIES IN ITS RECENT STATEMENT OF FINANCIAL POSITION:
Showroom Manufacturing Company
For the year ended 2022
2021 Cost of Goods Manufactured
• Raw Materials P 33,700 For the year 2022
P36,500
• Work in process 74,450 Total Manufacturing costs
83,750
• Finished Goods 21,900
25,450
Add Work in Process, Beginning
• Additional information for the year 2022 shows that:
• Sales Total Cost Placed in Process
P280,000
• Direct labor
45,000 Less Work in Process, end
• Total manufacturing costs incurred 241,300
• Raw material purchases 50,000
• Operating expenses 14,600 Cost of Goods Manufactured
 SHOWROOM MANUFACTURING COMPANY
COST OF GOODS MANUFACTURED
Total Manufacturing costs
FOR THE YEAR 2022 241,300

Add Work in Process, Beginning 83,750

Total Cost Place in Process

325,050
Less Work in Process, end 74,450
 SHOWROOM MANUFACTURING COMPANY
FACTORY OVERHEAF
FOR THE YEAR 2022

Total Manufacturing costs 241,300

Less: Raw Materials Used 52,800

Direct Labor 45,000 97,800

Manufacturing Expenses/FO 143,500

THE SHOWROOM MANUFACTURING COMPANY INDICATED THAT THE FOLLOWING
INVENTORIES IN ITS RECENT STATEMENT OF FINANCIAL POSITION:
Showroom Manufacturing Company
For the year ended
2022 2021 Cost of Goods Sold
• Raw Materials P 33,700 For the year 2022
P36,500
• Work in process 74,450 Finished Goods Inventory, Beginning
83,750
• Finished Goods 21,900
25,450 Add Cost of Goods Manufactured
• Additional information for the year 2022 shows that:
• Sales P280,000
• Direct labor Total Goods Available for Sales
45,000
• Total manufacturing costs incurred 241,300
• Raw material purchases 50,000 Less Finished Goods Inventory, End
• Operating expenses
14,600
Cost of Goods Sold
 SCHEDULE 1-COST OF GOODS SOLD

Finished Goods Inventory, Beginning 25,450

Add Cost of Goods Manufactured 250,600
Total Goods Available for Sale 276,050
Less Finished Goods Inventory, End 21,900
Cost of Goods Sold 254,150
• =======
THE SHOWROOM MANUFACTURING COMPANY INDICATED THAT THE FOLLOWING
INVENTORIES IN ITS RECENT STATEMENT OF FINANCIAL POSITION:
Showroom Manufacturing Company
For the year ended
2022 2021 Income Statement
• Raw Materials P 33,700 For the year Ended December 31, 2022
P36,500
• Work in process 74,450
83,750 Sales
• Finished Goods 21,900
25,450 Less Cost of Goods Sold
• Additional information for the year 2022 shows that:
Gross Profit
• Sales P280,000
• Direct labor Less Operating Expenses
45,000
• Total manufacturing costs incurred 241,300
Net Income
• Raw material purchases 50,000
• Operating expenses
14,600
 SHOWROOM MANUFACTURING COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2022

• Sales 280,000
• Less Cost of Goods Sold 254,150
• Gross Profit 25,850
• Less Operating Expenses 14,600
• Net Income 11,250
• ========
SEATWORK PER TEAM - . MANUFACTURING COSTS AND OTHER ACCOUNTS OF ROLLERS MANUFACTURING COMPANY APPEARED IN ITS DECEMBER 31, 2023 TRIAL BALANCE AS FOLLOWS:
REQUIRED: COMPUTE FOR THE FOLLOWING IN GOOD FORM

1. Manufacturing costs
2. Cost of goods manufactured
3. Cost of goods sold
4. Gross profit
5. Net income
•
 ASSIGNMENT

Worksheet preparation:
• Copy the trial balance of Vera Cruz Furniture 379 in a
10-columns worksheet.
• Prepare the worksheet headings as follows:
• Unadjusted Trial balance, Transactions/Adjustments,
Adjusted Trial Balance, Income Statement and
Statement of Financial Position.
SOLUTION SHEET FOR ROLLERS MANUFACTURING COMPANY
COST OF GOODS MANUFACTURED
COST OF GOODS SOLD
GROSS PROFIT – NET INCOME
 ACCOUNTING FOR A MANUFACTURING
CONCERN
• Two accounting system applicable for a manufacturing
concern:
• Cost system
• Non-cost system
• Periodic system in recording the inventory
• Non-voucher system in recording disbursements
• Use of specific accounts rather than control accounts