Hayward Company, a manufacturing firm, has supplied the following information from its accounting records for the month of May:

Direct labor cost $10,500

Purchases of raw materials 15,000

Supplies used 675

Factory insurance 350

Commissions paid 2,500

Factory supervision 2,225

Advertising 800

Material handing 3,750

Materials inventory, May 1 3,475

Work-in-process inventory, May 1 12,500

Finished goods inventory, May 1 6,685

Materials inventory, May 31 9,500

Work-in-process inventory, May 31 14,250

Finished goods inventory, May 31 4,250

Required:

1. Prepare a statement of cost of goods manufactured.

2. Prepare a statement of cost of goods sold.

Hayward Company

Statement of Cost of Goods Manufactured

For the month Ended May 31

Raw Materials

Raw material, beginning $3,475

Add:Purchases 18,475

Raw materials available 21,950

Less: Raw material, end 9,500

Cost of raw material used 12,450

Add: Direct labor 10,500

Prime Cost 22,950

Add:Manufacturing overhead 6,550

Manufacturing cost 29,500

Add: Work in process, beginning 12,500

Less: Work in process, Ending 14,250

Cost of Goods Manufactured $27,750

Hayward Company

Statement of Cost of Goods Sold

For the month Ended May 31

Finished goods, beginning $6,685

Add: Cost of Goods Manufactured 27,075

Cost of goods available for sale 33,760

Less: Finished goods, ending 4,250

Cost of goods sold $29,510

Explanation:

Cost of goods manufacture used to compute cost of goods manufacture for the period. It started from the raw materials beginning inventory then add the purchases of the raw materials including the handling cost to get the raw materials available. Then deduct the raw materials end to get the cost of raw material used for the period. Add direct labor to get the prime cost and then add manufacturing overhead to the prime cost to get the manufacturing cost. Lastly, add work in process beginning and deduct the work in process end to get the cost of goods manufactured.

In preparation of cost of goods sold, we start from the cost of goods manufactured we computed earlier and add the finished goods beginning to get the cost of goods available for sale. And from there we deduct the finished goods ending inventory to get the cost of goods sold for the period.