EXAMPLE 1

Elektrika Sdn Bhd produced 1,000 refrigerators a

month. The cost and expenses incurred are as below:

RM
a) Factory equipment rent 1,500
b) Factory building insurance 500
c) direct Raw materials 200,000
d) Factory utilities 800
e) Office supplies 400
f) Assembly line wages 70,000
g) Depreciation on office equipment 400
h) Indirect materials 10,000
i) Factory property taxes 125
j) Factory supervisory salaries 1,700
k) Advertising 1,250
l) Sales commission 80,000
m) Depreciation on factory building 900
Instructions:

a) Classify the above items into product costs, period

costs, prime costs and conversion costs.

b) Determine the total amount of manufacturing

costs, product costs, non-manufacturing costs and
period costs.

c) Determine the total amount of prime costs and

conversion costs.

d) Determine the total amount of direct costs and

indirect manufacturing costs.
 Product Cost
Cost Period Prime Conversion
Item Direct Direct Mfg
Cost Cost Cost
Material Labor Overhead

a X X
b X X
c X X
d X X
e X
f X X X
g X
h X X
i X X
j X X
k X
l X
m X X
MANUFACTURING COSTS:
RM
Direct Materials:
Raw materials 200,000
Direct Labor:
Assembly line wages 70,000
Manufacturing Overhead:
Factory equipment rent 1,500
Factory building insurance 500
Factory utilities 800
Indirect materials 10,000
Factory property taxes 125
Factory supervisory salaries 1,700
Depreciation on factory building 900
MANUFACTURING COSTS 285,525
PRODUCT COSTS:
RM
Direct Materials:
Raw materials 200,000
Direct Labor:
Assembly line wages 70,000
Manufacturing Overhead:
Factory equipment rent 1,500
Factory building insurance 500
Factory utilities 800
Indirect materials 10,000
Factory property taxes 125
Factory supervisory salaries 1,700
Depreciation on factory building 900
PRODUCT COSTS 285,525
NON-MANUFACTURING COSTS:
RM
Office supplies 400
Depreciation on office equipment 400
Advertising 1,250
Sales commissions 80,000
NON-MANUFACTURING COSTS 82,050
PERIOD COSTS:
RM
Office supplies 400
Depreciation on office equipment 400
Advertising 1,250
Sales commissions 80,000
PERIOD COSTS 82,050
PRIME COSTS:
RM
Direct Materials:
Raw materials 200,000
Direct Labor:
Assembly line wages 70,000
PRIME COSTS 270,000
CONVERSION COSTS:
RM
Direct Labor:
Assembly line wages 70,000
Manufacturing Overhead:
Factory equipment rent 1,500
Factory building insurance 500
Factory utilities 800
Indirect materials 10,000
Factory property taxes 125
Factory supervisory salaries 1,700
Depreciation on factory building 900
CONVERSION COSTS 85,525
DIRECT COSTS:
RM
Direct Materials:
Raw materials 200,000
Direct Labor:
Assembly line wages 70,000
DIRECT COSTS 270,000
INDIRECT MANUFACTURING COSTS:
RM
Manufacturing Overhead:
Factory equipment rent 1,500
Factory building insurance 500
Factory utilities 800
Indirect materials 10,000
Factory property taxes 125
Factory supervisory salaries 1,700
Depreciation on factory building 900
INDIRECT MANUFACTURING COSTS 15,525
 COST OF GOODS MANUFACTURED
2.9 STATEMENT & INCOME STATEMENT

COST OF GOODS INCOME STATEMENT

MANUFACTURED (partial)
STATEMENT

Direct Materials used COST OF GOODS SOLD

Direct Labor
Manufacturing Overhead
Current Manufacturing Cost
+ Work In Process, beginning
- Work In Process, ending
Cost Of Goods Manufactured
Finished Goods Inventory, beginning
+ Cost Of Goods Manufactured
Cost Of Goods available for sale
Finished Goods Inventory, ending
Cost Of Goods Sold

 prepared to compute the

cost of finished goods for
the current period.
 (Company name)
Cost of Goods Manufactured Statement for the year ended …
Direct Materials:
Raw materials inventory, beginning XXX
+ Raw materials purchased XXX
Raw materials available for use XXX
(-) Raw materials inventory, ending XXX
Direct Materials Used XXX
Direct Labor:
Assembly line wages XXX
Manufacturing Overhead:
Indirect Labor XXX
Indirect Materials XXX
Factory manager’s salary XXX
Total manufacturing overhead XXX
Total current manufacturing costs XXX
(+) Work in process, beginning XXX
Total cost of work in process XXX
(-) Work in process, ending XXX
*COST OF GOODS MANUFACTURED XXX
 (Company name)
Income Statement for the year ended …

Sales (net) XXX

(-) COST OF GOODS SOLD:
Finished goods inventory, beginning XXX
(+) Cost of goods manufactured * XXX
Cost of goods available for sale XXX
(-) Finished goods inventory, ending (XXX)
Cost of goods sold (XXX)
Gross profit XXX
(-) Operating expenses:
Sales expenses XXX
Administrative expenses XXX (XXX)
Net Income XXX
 EXAMPLE 2
Ohsem Manufacturing Company has the following cost and
expense data for the month ending March 31, 2015:

Accounts receivable RM20,000

Sales 90,000
Assembly line wages 22,000
Factory utilities 5,000
Factory supervisory salaries 2,000
Plant and equipment 111,000
Factory taxes 2,000
Raw materials, March 1 9,000
Raw materials, March 31 11,000
Finished goods, March 1 18,000
Finished goods, March 31 7,000
Work in process, March 1 18,000
Work in process, March 31 8,000
Factory maintenance 4,000
Advertising 3,000
Raw materials purchased 20,000
Sales commissions 5,000
Accumulated depreciation on plant and equipment 61,000
Sales expenses 12,000
Administrative expenses 10,000
Depreciation on plant and equipment 6,000

Instructions:
Prepare Cost of Goods Manufactured Statement and Income
Statement.
 Ohsem Manufacturing Company
Cost of Goods Manufactured Statement
Direct Materials:
for the month ended, March 31, 2015
Raw materials inventory, March 1 9,000
+ Raw materials purchased 20,000
Raw materials available for use 29,000
(-) Raw materials inventory, March 31 (11,000)
Direct Materials Used 18,000
Direct Labor:
Assembly line wages 22,000
Manufacturing Overhead:
Factory utilities 5,000
Factory supervisory salaries 2,000
Factory taxes 2,000
Factory maintenance 4,000
Depreciation on plant and equipment 6,000
Total manufacturing overhead 19,000
Total current manufacturing costs 59,000
(+) Work in process, March 1 18,000
Total cost of work in process 77,000
(-) Work in process, March 31 (8,000)
COST OF GOODS MANUFACTURED 69,000
 Ohsem Manufacturing Company
Comprehensive Income Statement
for the month ended, March 31, 2015
Sales (net) 90,000
(-) COST OF GOODS SOLD:
Finished goods inventory, beginning 18,000
(+) Cost of goods manufactured * 69,000
Cost of goods available for sale 87,000
(-) Finished goods inventory, ending (7,000)
Cost of goods sold (80,000)
Gross profit 10,000
(-) Operating expenses:
Advertising 3,000
Sales commissions 5,000
Sales expenses 12,000
Administrative expenses 10,000 (30,000)
Net Loss (20,000)