Raw materials used in production
Raw materials inventory, beginning
+ Purchase of raw materials
- Raw materials inventory, ending
= Raw materials used in production

Cost of Goods Manufactured
Work in process inventory, beginning
+ Raw materials used in production
+ Direct labor
+ Manufacturing overhead
= Total manufacturing costs
- Work in process inventory, ending
= Cost of goods manufactured

Cost of Goods Sold
Finished goods inventory, beginning
+ Cost of goods manufactured
= Cost of goods available for sale
- Finished goods inventory, ending
= Cost of goods sold

Sales
- Cost of goods sold
= Gross Margin

Predetermined Overhead Rate
Estimated manufacturing overhead/Estimated machine hours= $ per machine hour

Calculate applied overhead
Actual machine hours X $ per machine hour = applied overhead

Journal entry for the application of overhead
Work in process Manufacturing overhead

Over or Under Applied
Manufacturing overhead
+Debit - Credit
Actual Applied 640,000
-------------------------------------------------
665,000
25,000 under-applied

Journal entry to close out over under applied
Cost of goods sold Manufacturing overhead = (if under applied)…..(if over applied flip flop)

Activity Based Costing
Total cost / total activity = $ per activity
$ per activity X corresponding production
That answer / number of units produced = $ per unit
$ per unit + Direct materials + Direct labor = Total cost per unit

Units Transferred Out
Units in process, beginning
+ Units started into production
- Units in process, ending
= Total transferred out

Equivalent units (make a column for materials and conversion)
Transferred out
+ Work in process, ending (look at the percentages for materials and conversion and multiply that percentage by the WIP, ending)
= Total equivalent units

Cost per Equivalent