Example Company

Statement of Cost of Goods Manufactured and Sold

Beginning raw materials inventory
Add: Purchases of raw materials
Raw materials available
Less: Ending raw materials inventory
Raw materials used in production
Direct labor
Overhead
Total manufacturing cost
Add: Beginning work in process inventory

$
$
$

$
$

Less: Ending work in process inventory

Cost of goods manufactured
Add: Beginning finished goods inventory
Goods available for sale
Less: Ending finished goods inventory
Cost of goods sold

$
$
$

5,000
187,000
192,000
(7,000)
185,000
71,000
134,000
390,000 Input
6,000
396,000
(8,000)
388,000 Output
3,000
391,000
(2,000)
389,000 Expense

Selling price

250 per unit

Material
Labor
Variable overhead

$
$
$

80 per unit
60 per unit
30 per unit

Fixed overhead

Variable selling expenses

Fixed selling expenses

$
Year 1
20,000
20,000

Units produced
Units sold

Absorption costing income statements

Year 1
Year 2
$
5,000,000 $
5,750,000
4,200,000
4,676,667
$
800,000 $
1,073,333
450,000
480,000
$
350,000 $
593,333

Sales
Cost of G
Gross profit
Selling expenses
Net income

800,000

Less. Selling Exp

Selling Fix

250,000
Year 2

Year 3
24,000
23,000

Year 1
Absorption costing income statements
20,000
250
20000 $
170 $
3,400,000
800,000.00
$
4,200,000
20000

10

$
$

Year 3
6,250,000
5,019,231
1,230,769
500,000
730,769

26,000
25,000

5,000,000.00

200000
250000
450000

(4,200,000)
800,000.00

(450,000.00)
350,000.00

Net Incom

Variable costing income statements

$
5,000,000 $
3,400,000
200,000
$
1,400,000 $
800,000
250,000
$
350,000 $

Sales
Var. cost of goods sold
Year 4 Var. selling expenses
28,000 Contribution margin
30,000 Fixed overhead
Fixed selling expenses
Net income

Sale
Less, Cost CGS
Fixed Cost
Less;Ending
COGM

Year 2
Absorption costing income statements
23,000
250
24000 $
170 $
1000

203.33
$

CGS
Less. Selling Exp
Selling Fix

5,750,000
3,910,000
230,000
1,610,000
800,000
250,000
560,000
33,333

Variable costing income statements

20,000
250
20000 $
170 $
3,400,000
20000 $
10 $
200,000
$
3,600,000

5,000,000.00

800000
250000
1050000

COGM
CGS
Less. Selling Exp
Selling Fix

khan Year 03
Absorption costing income statements
25,000
250
26000 $
170 $
4,420,000
800,000.00
1000
203.33
203,330.00
2000
200.77
(401,540)
$

25,000

10

5,021,790

6,250,000.00

250000
250000
500000

$
$
$

Variable costing income statements

25,000
250
25,000 $
170 $
4,250,000
25,000 $
10 $
250,000
$
4,500,000
800000
250000
1050000

(5,021,790)
1,228,210.00

(500,000.00)
728,210.00

Net Incom
Sale
Less, Cost CGS
V/ Selling
COGM
CGS
Less. Selling Exp
Selling Fix

(3,600,000)
1,400,000.00

(1,050,000.00)
350,000.00

Net Incom

Sale
Less, Cost CGS
Fixed Cost
Add;Opening
Less: Ending

$
$

7,500,000
5,957,143
1,542,857
550,000
992,857

6,250,000
4,250,000
250,000
1,750,000
800,000
250,000
700,000

7,500,000
5,100,000
300,000
2,100,000
800,000
250,000
1,050,000

30,769

(57,143)

5,750,000.00
4,080,000
800,000.00
(203,330.00)
4,676,670 $

(4,676,670)
1,073,330.00

23000

10

230000
250000
480000

(480,000.00)
593,330.00

Sale
Less, Cost CGS
V/ Selling
COGM
CGS
Less. Selling Exp
Selling Fix

10 per unit

Difference

Sale
Less, Cost CGS
Fixed Cost
COGM
CGS

6,250,000.00

(4,500,000)
1,750,000.00

(1,050,000.00)

Sale
Less, Cost CGS
V/ Selling
COGM
CGS
Less. Selling Exp
Selling Fix

Variable costing income statements

23,000
250
23000 $
170 $
23000 $
10 $
$

5,750,000.00
3,910,000
230,000
4,140,000

800000
250000
1050000

(1,050,000.00)
560,000.00

Net Incom

Sale
Less, Cost CGS
Fixed Cost
Add;Opening

COGM
CGS
Less. Selling Exp
Selling Fix

Year 04
Absorption costing income statements
30,000
250
28000 $
170 $
2000

200.77

$
$

30,000

10

7,500,000.00
4,760,000
800,000.00
401,540.00
5,961,540

300000
250000
550000

$
$
$

Variable costing income statements

30,000
250
30,000 $
170 $
30,000 $
10 $
$

(5,961,540)
1,538,460.00

(550,000.00)
988,460.00

Net Incom
Sale
Less, Cost CGS
V/ Selling
COGM
CGS
Less. Selling Exp
Selling Fix

(4,140,000)
1,610,000.00

7,500,000.00
5,100,000
300,000
5,400,000
800000
250000
1050000

(5,400,000)
2,100,000.00

(1,050,000.00)

Net Incom

700,000.00

Net Incom

1,050,000.00

A worker is paid for an 8-hour day. The worker can produce 10 units per hour and is
paid $10 per hour ($1 per unit). The worker only produced 50 units on Monday.
Cost of capacity available: $80 Cost of capacity used: 50 units * $1 per unit = $50
Cost of unused capacity: $80 - $50 = $30