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 Statement
P2 Prepare a manufacturing statement and explain its purpose and links to financial statements.
A company's manufacturing activities are described in a manufacturing statement, also called the schedule of manufacturing activities or the schedule of cost of goods manufactured. The manufacturing statement summarizes the types and amounts of costs incurred in a company's manufacturing process. Exhibit 14.17 shows the manufacturing statement for Rocky Mountain Bikes. The statement is divided into four parts: direct materials, direct labor, overhead, and computation of cost of goods manufactured. We describe each of these parts in this section.

EXHIBIT 14.17
Manufacturing Statement 1. 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.) 2. 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.
Point: Direct material and direct labor costs