Published On:Friday, 16 December 2011
Posted by Muhammad Atif Saeed
Structure of Cost of Goods Solds
Supplementary Note re Schedules of COGM and COGS in a “Normalized” Job Cost System
Schedule of Cost of Goods Manufactured
In a normal Job Cost System that uses a pre-determined overhead rate, the COGM schedule is similar the schedule we prepared in Chapter 2 for an actual cost system with two notable exceptions:
- The Direct Materials account is now a Raw Materials account that contains both direct and indirect materials. As a result, the presentation of this part on the schedule appears as follows:
RM, beginning xxxx
Add: Purchases of RM xxxx
RM available xxxx
Less: RM ending xxxx
RM used in production xxxx
Less: indirect materials used (in MO) xxxx
DM used xxxx
- The MO applied is usually shown as one line (just like Direct Labour) and the actual MO amounts are not shown. However, if you wish to show all the actual MO amounts line by line, then you must list them and subtotal them (like we did on the COGM schedule in chapter 2), and then ADD back the overapplied overhead or SUBTRACT the underapplied overhead to convert back to the MO-applied.
Example
Manufacturing Overhead:
Indirect materials xxx
Indirect labour xxx
Factory depreciation xxx
Total Actual MO
Add: MO overapplied xx
MO applied to WIP xxx
Schedule of Cost of Goods Sold
The Schedule of COGS is the same as in chapter 2 except that the COGS must reflect the actual COGS. This requires that we add back any underapplied MO or subtract any overapplied MO (the exact opposite to what we did on the COGM schedule). This brings COGS back to the actual amount.
Example:
FG, beginning xxxx
Add: COGM xxxx
COGAS xxxx
Less, FG, ending xxxx
COGS before adjustment xxxx
Add: Underapplied MO xxx
COGS as adjusted xxxx
