Accounting Formulas

Total manufacturing costs

Direct materials + Direct labour + Manufacturing overhead

$$\text{Raw Materials Used} + \text{Direct Labour} + \text{Manufacturing Overhead}$$

Cost of goods manufactured (COGM)

Total manufacturing costs + Beginning work-in-process inventory − Ending work-in-process inventory

$$\text{Total Manufacturing Costs} + \text{Beginning WIP} - \text{Ending WIP}$$

Look for Raw Materials Used, Direct Labour, Manufacturing Overhead, Beginning WIP, and Ending WIP.

Goods available for sale

Beginning finished goods inventory + Cost of goods manufactured

Cost of goods sold (COGS)

Goods available for sale − Ending finished goods inventory

$$\text{COGM} + \text{Beginning Finished Goods} - \text{Ending Finished Goods}$$

Gross margin

Sales − Cost of goods sold

Net income

Gross margin − Operating expenses

or Sales−COGS−Selling Expenses−Administrative Expenses

Raw Materials

Beginning Materials, Purchases, and Ending Materials.

Total conversion costs

Total Conversion Costs = Beginning Conversion Cost Cost Added During Period

Debit side (left)

D- Dividends

E- Expenses (COGS, Rent, Salaries)

A- Assets (Cash, Inventory, Equip)

Credit Side (Right)

L- liabilities (Loans, payables)
E- Equity (Owners capital)
R- Revenue (Sales)

Chapter 4

Units Transferred Out

$$\text{Units Transferred Out} = \text{Beginning WIP} + \text{Units Started} - \text{Ending WIP}$$

Weighted Average Method

Example:

$$\text{Units Transferred Out} = 200,000$$

$$\text{Ending WIP } (30,000 \times 60\%) = 18,000$$

$$\mathbf{\text{Equivalent Units (Materials)}} = 200,000 + 18,000 = \mathbf{218,000\text{ EUs}}$$