process inventory. The cost of unfinished products consists of direct materials, direct labor, and factory overhead, and is reported on the current period’s balance sheet. The costs of both fin¬ished goods manufactured and goods in process are product costs.SaHes Activity The company’s sales activity is portrayed in the far right side of Exhibit 1.15. Newly completed units are combined with beginning finished goods inventory to make up total finished goods available for sale in the current period. The cost of finished products sold is reported on the income statement as cost of goods sold. The cost of products not sold is reported on the current period’s balance sheet as ending finished goods inventory.Manufacturing StatementA company’s manufacturing activities are described in a manufacturing statement, also called the schedule of manufacturing activities or the schedule of cost of goods manufac¬tured. The manufacturing statement summarizes the types and amounts of costs incurred in a company’s manufacturing process. Exhibit 1.16 shows the manufacturing statement for Rocky Mountain Bikes. The statement is divided into four parts: direct materials, direct la¬bor, overhead, and computation of cost of goods manufactured. We describe each of these parts in this section.© The manufacturing statement begins by computing direct materials used. We start by adding beginning raw materials inventory of $8,000 to the current period’s purchases of $86,500. This yields $94,500 of total raw materials available for use. A physical count of inventory shows $9,000 of ending raw materials inventory. This implies a total cost of raw materials used during the period of $85,500 ($94,500 total raw materials available for use - $9,000 ending inventory). (Note: All raw materials are direct materials for Rocky Mountain Bikes.)@ The second part of the manufacturing statement reports direct labor costs. Rocky Mountain Bikes had total direct labor costs of $60,000 for the period. This amount includes payroll taxes and fringe benefits.finished goods ending inventory (balance sheet)cost of goods sold (income statement)
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