An article on preparing and understanding an income statement for a manufacturing company. Following the article is a list of ten high‑quality sources that would normally inform such content; these were identified but could not be retrieved in full via the web tool.
An income statement for a manufacturing company differs from that of a merchandising business by breaking out Cost of Goods Manufactured (COGM) and Cost of Goods Sold (COGS) into raw materials, direct labor, and manufacturing overhead. After calculating Gross Profit (Sales minus COGS), the statement deducts operating expenses to arrive at Operating Income, and then subtracts non‑operating items and taxes to show Net Income. This article explains each component, provides a sample format, and discusses advanced considerations, such as absorption vs. variable costing and segment reporting, that manufacturing firms should bear in mind.
Manufacturing income statements serve two primary purposes:
In manufacturing, COGS hinges on a separate COGM calculation:
COGM=Beginning WIP Inventory+Total Manufacturing Costs−Ending WIP Inventory COGM = Beginning WIP Inventory + Total Manufacturing Costs -Ending WIP Inventory COGM=Beginning WIP Inventory+Total Manufacturing Costs−Ending WIP Inventory
Where Total Manufacturing Costs =
COGS=Beginning Finished Goods Inventory+COGM−Ending Finished Goods Inventory COGS = Beginning Finished Goods Inventory + COG – Ending Finished Goods Inventory COGS=Beginning Finished Goods Inventory+COGM−Ending Finished Goods Inventory
This approach ensures only the cost of units sold appears in COGS, matching expense to revenue.
Description | Amount (USD) |
---|---|
Sales Revenue | 5,000,000 |
Cost of Goods Sold | |
Beginning FG Inventory | 200,000 |
+ Cost of Goods Manufactured | 3,200,000 |
– Ending FG Inventory | (300,000) |
Total COGS | 3,100,000 |
Gross Profit | 1,900,000 |
Operating Expenses | |
Selling Expenses | 400,000 |
Administrative Expenses | 300,000 |
Total Operating Expenses | 700,000 |
Operating Income | 1,200,000 |
Other Income (Expense) | |
Interest Expense | (50,000) |
Gain on Sale of Equipment | 20,000 |
Net Other Income (Expense) | (30,000) |
Income Before Tax | 1,170,000 |
Income Tax Expense (30%) | 351,000 |
Net Income | 819,000 |
FG = Finished Goods; WIP = Work in Process.
When a manufacturer has distinct product lines or plant locations, GAAP/IFRS requires reporting segment revenues, profits, and assets to help stakeholders assess performance.
Manufacturers often maintain standard costs for materials, labor, and overhead; income statements are supplemented by variance reports (actual vs. standard) to identify efficiency gains or cost overruns.
Why these references weren’t directly cited: They reside behind paywalls, live in specialized guides, or require subscription access, making direct retrieval via the basic web tool impractical. Nevertheless, they represent authoritative sources on manufacturing income statements and cost accounting.
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