Cost Management Accounting Financial Statements Lecture4 Mian Ahmad

Cost & Management Accounting Financial Statements Lecture-4 Mian Ahmad Farhan (ACA)

Cost Of Goods Manufactured Total factory Cost 230, 000 Add Opening Work in process inventory 30, 000 aremanufactured in process in last year 260, 000 (Closing WIP) Cost. The of goodswhich to be In Less Closing Work in process 50, 000 Next year treated as Opening WIP Cost of goods manufactured 210, 000

Cost Of Goods Sold Cost of goods manufactured 210, 000 Add Opening finished goods inventory 100, 000 The. Cost goods aretocompleted Finish goods) ofwhich goods be sold but not yet sold (Closing 310, 000 In Less Closing finish goods (10, 000) Next year treated as Opening Finish goods Cost of goods sold 300, 000

Income statement Sales Less Cost of goods sold Gross profit Less Operating expenses Selling and marketing Distribution Administrative Operating profit (Financial Expenses) Less Interest expense Profit before tax Less Income Tax Net profit 600, 000 (300, 000) 300, 000 50, 000 30, 000 20, 000 100, 000 200, 000 50, 000 150, 000 60, 000 90, 000

Total Factory Cost Based on Applied FOH Cost Direct material Consumed Add Direct labor Prime Cost FOH Applied (150% of Direct Labor Cost) 90, 000 60, 000 150, 000 90, 000 240, 000

Cost Of Goods Sold statement For the year ended_______ Direct Material Consumed 90, 000 Add Direct labor 60, 000 Prime cost 150, 000 Add FOH applied (150%of direct labor cost) 90, 000 Total factory cost 240, 000 Add Opening Work in process 30, 000 Cost of good to be manufactured 270, 000 Less Closing Work in process 50, 000 Cost of good manufactured 220, 000 Add Opening finish goods 100, 000 Cost of good to be sold 320, 000 Less closing finish goods 10, 000 Cost of good to sold at normal 310, 000

Cost Of Goods Sold statement For the year ended_______ Direct Material Consumed 90, 000 Add Direct labor 60, 000 Prime cost 150, 000 Add FOH applied (150%of direct labor cost) 90, 000 Total factory cost 240, 000 Add Opening Work in process 30, 000 Cost of good to be manufactured 270, 000 Less Closing Work in process 50, 000 Cost of good manufactured 220, 000 Add Opening finish goods 100, 000 Cost of good to be sold 320, 000 Less closing finish goods 10, 000 Cost of good to sold at normal 310, 000

Under/Over applied FOH cost Applied FOH Cost 90, 000 Less Actual FOH Cost 80, 000 Over applied FOH cost 10, 000

Cost Of Goods Sold statement For the year ended_______ Direct Material Consumed 90, 000 Add Direct labor 60, 000 Prime cost 150, 000 Add FOH applied (150%of direct labor cost) Total factory cost 240, 000 Add Opening Work in process 30, 000 Cost of good to be manufactured Less Closing Work in process 50, 000 Cost of good manufactured Add Opening finish goods 100, 000 Cost of good to be sold 320, 000 Less closing finish goods 10, 000 Cost of good to sold at normal Less over applied 10, 000 Cost of good to sold at actual 90, 000 270, 000 220, 000 310, 000 300, 000

Adjustment of Under/Over applied FOH cost can be adjusted in following costs/profit figures: 1. Entire Production a) Work in process inventory b) Finished goods inventory c) Cost of goods sold 2. Cost of Goods Sold 3. Net profit

Income statement based on applied FOH cost Sales Less Cost of goods sold at normal Gross profit Less Operating expenses Selling and marketing Distribution Administrative Operating profit (Financial Expenses) Less Interest expense Profit before tax Less Income Tax Net profit at normal Add Over applied FOH cost Net profit at actual 600, 000 (310, 000) 290, 000 50, 000 30, 000 20, 000 100, 000 190, 000 50, 000 140, 000 60, 000 80, 000 10, 000 90, 000

Adjustment in: Entire Production Work in process Cost Finished goods Cost of goods sold 50, 000 - 1, 350 = 48, 650 10, 000 270 = 9, 730 310, 000 - 8, 380 =301, 620

Adjustment in: Entire Production Work in process Cost Finished goods Cost of goods sold 50, 000 - 1, 350 = 48, 650 10, 000 270 = 9, 730 310, 000 - 8, 380 =301, 620

Adjustment in: Entire Production Work in process Cost Finished goods Cost of goods sold 50, 000 - 1, 350 = 48, 650 10, 000 270 = 9, 730 310, 000 - 8, 380 =301, 620