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

100 per unit

Material
Labor
Variable overhead

$
$
$

30 per unit
15 per unit
5 per unit

Fixed overhead

$ 50,000

Variable selling expenses

Fixed selling expenses

Units produced
Units sold

10 per unit

$ 10,000
Year 1
2,000
2,000

Absorption costing income statements

Year 1
Sales
$ 200,000
Cost of goods sold
150,000
Gross profit
$
50,000
Selling expenses
30,000
Net income
$
20,000

Year 2
4,000
###

Year 3
2,000
4,000

Variable costing income statements

Sales
$ 200,000
Var. cost of goods sold
100,000
Var. selling expenses
20,000
Contribution margin
$
80,000
Fixed overhead
50,000
Fixed selling expenses
10,000
Net income
$
20,000
Difference

costing income statements

Year 2
$ 200,000
125,000
$
75,000
30,000
$
45,000

osting income statements

$ 200,000
100,000
20,000
$
80,000
50,000
10,000
$
20,000
$

25,000

Year 3
400,000
275,000
$ 125,000
50,000
$
75,000
$

400,000
200,000
40,000
160,000
50,000
10,000
100,000

(25,000)

#NAME?

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