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Computing cost of goods sold, merchandising company

Use the following information for The Windshield Helper, a retail merchandiser of auto windshields, to compute the cost of goods sold:

Web Site Maintenance $ 7,900

Delivery Expense 400

Freight In 2,400

Purchases 47,000

Ending Merchandise Inventory 5,500

Revenues 63,000

Marketing Expenses 10,700

Beginning Merchandise Inventory 8,600

Short Answer

Expert verified

The cost of goods is computed as $52,500

Step by step solution

01

Definition of COGS

COGS stands for the Cost Of Goods Sold. It refers to the number of goods that are sold to the customers.

02

Computation of COGS

Computation of Cost of goods sold

COGS

Amount ($)

Beginning Merchandise Inventory

$8,600

Purchase and freight in (47,000+2,400)

$49,400

Cost of goods available for sale

$58,000

Ending Merchandise Inventory

-$5,500

Cost of goods sold

$52,500

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Most popular questions from this chapter

Computing cost of goods manufactured

Consider the following partially completed schedules of cost of goods manufactured. Compute the missing amounts.

Banner, Inc. Larryโ€™s Bakery Sports Gear

Beginning Work-in-Process Inventory (a) 40,800 \( 2,200

Direct Materials Used 14,400 35,900 (g)

Direct Labor 10,300 20,100 1,900

Manufacturing Overhead (b) 10,000 900

Total Manufacturing Costs Incurred during the Year 45,200 (d) (h)

Total Manufacturing Costs to Account for 55,400 (e) 8,300

Ending Work-in-Process Inventory (c) (25,500) (2,600)

Cost of Goods Manufactured \) 50,500 (f) (i)

Classifying period costs and product costs

Langley, Inc. is the manufacturer of lawn care equipment. The company incurs the following costs while manufacturing edgers:

โ€ข Handle and shaft of edger

โ€ข Motor of edger

โ€ข Factory labor for workers assembling edgers

โ€ข Lubricant used on bearings in the edger (not traced to the product)

โ€ข Glue to hold the housing together

โ€ข Plant janitorial wages

โ€ข Depreciation on factory equipment

โ€ข Rent on plant

โ€ข Sales commissions

โ€ข Administrative salaries

โ€ข Plant utilities

โ€ข Shipping costs to deliver finished edgers to customers

Requirements

1. Describe the difference between period costs and product costs.

2. Classify Langleyโ€™s costs as period costs or product costs. If the costs are product costs, further classify them as direct materials, direct labor, or manufacturing overhead.

How is cost of goods manufactured calculated?

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

2. Helps in planning and controlling operations.

How do manufacturing companies differ from merchandising companies?

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