14-1

The
The Cost
Cost Accounting
Accounting Cycle
Cycle

• To prepare journal entries to

record cost-related transactions
• To compute cost of goods sold
related items
 14-2

The
The Cost
Cost Accounting
Accounting Cycle
Cycle

Bryan Company produces

a plywood countertop
backing. Bryan had no
beginning inventories of
work in process.
 14-3

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Purchase of materials: Bryan bought 1,400,000 feet
of wood at $0.095 per foot.

1. Materials Inventory $133,000

Cash or Accounts Payable $133,000
 14-4

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Bryan used 1,300,000 feet of wood.

2. Work in Process $123,500

Materials Inventory $123,500
 14-5

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Direct laborers earned $344,400 for 41,000 hours of
work at $8.40 per hour.

3a. Direct Labor $344,400

Cash or Accrued Payroll $344,400
3b. Work in Process Inventory $344,400
Direct Labor $344,400
 14-6

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Bryan incurred various overhead costs.

4. Variable Manufacturing Overhead $251,300

Fixed Manufacturing Overhead 461,000
Cash/Accrued Expenses/ Accumulated
Depreciation $712,300
 14-7

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Bryan finished 40,000 square yards of plywood.
Another 3,000 square yards were still in process at
the end of 20X5.
5. Work in Process Inventory $251,300
Variable Mfg. Overhead $251,300
Work in Process Inventory $461,000
Fixed Mfg. Overhead $461,000
 14-8

The
The Cost
Cost Accounting
Accounting Cycle
Cycle

Materials $ 123,500
Direct labor 344,400
Variable overhead 251,300
Fixed overhead 461,000
Total $1,180,200
Divided by equivalent production 42,000
Equals cost per unit $ 28.10
 14-9

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
The $28.10 cost per unit is used to transfer to
Finished Goods Inventory (40,000 units).

6. Finished Goods Inventory $1,124,000

Work in Process Inventory $1,124,000
 14-10

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Bryan sold 35,000 square yards that cost
$28.10 at $40 each.

7a. Cash or Accounts

Receivable $1,400,000
Sales $1,400,000
7b. Cost of Goods Sold $983,500
Finished Goods Inventory $983,500
 14-11

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
The company incurred $340,000 in selling
and administrative expenses.

8. Selling and Administrative Expenses

$340,000
Cash, Accrued Expenses $340,000
 14-12

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Work in Process Inventory
(2) $ 123,500
(3b) 344,400
(5) 251,300 $1,124,000 (6)
(5) 461,000
1,180,200 $1,124,000
Bal. $ 56,200
 14-13

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Finished Goods Inventory
(6) $1,124,000
$983,500 (7b)
Bal. $ 140,500

Cost of Goods Sold

(7b) $983,500
 14-14

The
The Cost
Cost Accounting
Accounting Cycle
Cycle
Income Statement for Bryan Company, Actual Process Costing
Sales $1,400,000
Cost of goods sold 983,500
Gross profit $ 416,500
Selling and administrative expenses
340,000
Income $ 76,500
 14-15

The
The Cost
Cost Accounting
Accounting Cycle
Cycle

Activity:
Problem 4