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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

Calculating unit cost per service

Marx and Tyler provides hair-cutting services in the local community. In February, the business cut the hair of 190 clients, earned \(4,800 in revenues, and incurred the following operating costs:

Hair Supplies Expense \) 950

Wages Expense 548

Utilities Expense 190

Depreciation Expenseโ€”Equipment 60

What was the cost of service to provide one haircut?

Distinguishing between direct and indirect costs Granger Cards is a manufacturer of greeting cards. Classify its costs by matching the costs to the terms.

  1. Direct materials
  2. Direct labor
  3. Indirect materials
  4. Indirect labor
  5. Other manufacturing overhead

a. Artistsโ€™ wages

b. Wages of materials warehouse workers

c. Paper

d. Depreciation on manufacturing equipment

e. Manufacturing plant managerโ€™s salary

f. Property taxes on manufacturing plant

g. Glue for envelopes

Determining the flow of costs through a manufacturerโ€™s inventory accounts

True Fit Shoe Company makes loafers. During the most recent year, True Fit incurred total manufacturing costs of \(21,900,000. Of this amount, \)2,600,000 was direct materials used and \(14,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)1,100,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)2,000,000; and Finished Goods Inventory, $1,080,000.

Requirements Analyze the inventory accounts to determine:

1. Cost of direct materials purchased during the year.

2. Cost of goods manufactured for the year.

3. Cost of goods sold for the year.

How do manufacturing companies differ from merchandising companies?

Preparing an income statement and calculating unit cost for a service company

The Glass Doctors repair chips in car windshields. The company incurred the following operating costs for the month of July 2018:

Salaries and wages \( 10,000

Windshield repair materials 4,100

Depreciation on truck 500

Depreciation on building and equipment 900

Supplies used 450

Utilities 4,550

The Glass Doctors earned \)25,000 in service revenues for the month of July by repairing 250 windshields. All costs shown are considered to be directly related to the repair service.

Requirements

1. Prepare an income statement for the month of July.

2. Compute the cost per unit of repairing one windshield, rounded to the nearest cent.

3. The manager of The Glass Doctors must keep unit operating cost below $80 per windshield in order to get his bonus. Did he meet the goal?

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