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Hayward Company, a manufacturing firm, has supplied the following information from its accounting records for the month of May:
Direct labor cost $10,500
Purchases of raw materials 15,000
Supplies used 675
Factory insurance 350
Commissions paid 2,500
Factory supervision 2,225
Advertising 800
Material handing 3,750
Materials inventory, May 1 3,475
Work-in-process inventory, May 1 12,500
Finished goods inventory, May 1 6,685
Materials inventory, May 31 9,500
Work-in-process inventory, May 31 14,250
Finished goods inventory, May 31 4,250
Required:
1.Prepare a statement of cost of goods manufactured.
2.Prepare a statement of cost of goods sold.

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mchaid015

Answer:

                 Hayward Company  

Statement of Cost of Goods Manufactured  

              For the month Ended May 31  

 

Raw Materials  

Raw material, beginning    $3,475

Add:Purchases                     18,475

Raw materials available    21,950

Less: Raw material, end      9,500

Cost of raw material used    12,450

Add: Direct labor                    10,500

Prime Cost                            22,950

Add:Manufacturing overhead         6,550

Manufacturing cost            29,500

Add: Work in process, beginning  12,500

Less: Work in process, Ending    14,250

Cost of Goods Manufactured      $27,750

 

         Hayward Company  

Statement of Cost of Goods Sold  

      For the month Ended May 31  

 

 

Finished goods, beginning    $6,685

Add: Cost of Goods Manufactured       27,075

Cost of goods available for sale            33,760

Less: Finished goods, ending       4,250

Cost of goods sold                    $29,510

Explanation:

Cost of goods manufacture used to compute cost of goods manufacture for the period. It started from the raw materials beginning inventory then add the purchases of the raw materials including the handling cost to get the raw materials available. Then deduct the raw materials end to get the cost of raw material used for the period. Add direct labor to get the prime cost and then add manufacturing overhead to the prime cost to get the manufacturing cost. Lastly, add work in process beginning and deduct the work in process end to get the cost of goods manufactured.

In preparation of cost of goods sold, we start from the cost of goods manufactured we computed earlier and add the finished goods beginning to get the cost of goods available for sale. And from there we deduct the finished goods ending inventory to get the cost of goods sold for the period.

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