ch2 guidlines Flashcards
How to compute Cost of Goods Sold
compute for merchandising companies and manufacturing companies
Merchandising companies COGS
Beginning inventory \+ Purchase plus freight-in and import duties = Cost of goods available for sale - Ending inventory = COGS
Manufacturing companies COGS
Beginning finished goods inventory \+ Cost of goods manufactured = Cost of goods available for sale - Ending finished goods inventory = COGS
Cost of Goods Manufactured
Beginning work in process inventory
+ Total manufacturing costs incurred during year
(DM used + DL + manufacturing overhead)
= Total manufacturing costs to account for
- Ending work in process inventory
= COGS
total cost
= total fixed costs + (variable costs per unit * number of units)
Current average cost
total cost / number of units
total projected costs
total fixed costs + total variable costs
projected average costs
total costs / number of units
service companies
provide customers with intangible services. Have no inventories on the balance sheet
merchandising companies
resell tangible products purchased ready-made from suppliers. Have only one category of inventory
manufacturing companies
use labor, plant, and equipment to transform raw materials into new finished products. Three categories of inventory: raw materials, work in process, and finished goods
added value
R&D Design Production or Purchase Marketing Distribution Customer Service
cost objects
direct (traced) and indirect costs (allocated)
who uses total cost
managers
who uses inventoriable product costs
external financial reporting
costs treated as inventoriable under GAAP
Service: no inventoriable product costs
Merchandising: the cost of merchandise purchased plus all costs of transportation
Manufacturing: DM, DL, and MO
how inventoriable product costs are treated on the financial statement
Balance sheet: assets(inventory)
Income statement: expenses(COGS)
Inventoriable product cost
DM + DL + MO
Average cost per unit
Total cost / Number of units
Direct materials used
Beginning Raw Materials Inventory \+ Purchases of direct materials, freight-in, import duties = Materials available for use - Ending Raw Materials Inventory = Direct materials used
Income statement
Sales Revenue
- COGS
Beginning inventory
Plus: purchase
= cost of goods available for sale
- ending inventory
= cost of goods sold
= gross profit
Operating expenses
Expenses
Total operating expenses ()
Operating income
