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# Cost of Goods Sold Problems and Solutions

## Problem # 1:

These data relate to Zakar Co.’s July 2017 operations:

Factory overhead is applied at the rate of 80% of direct labor cost.

Requirement:

Cost of materials purchased, Cost of goods manufactured, Cost of goods sold and Conversion Cost.

### Solution:

Zakar Company

Cost of Goods Sold Statement

For the Ended July, 2017

 Opening Inventory 7,000 Net Purchases (Calculated) 48,400 Direct Expenses 400 Material Available for use 55,800 Closing Inventory (9,000) Direct Material used 46,800 Direct Labor (80% of direct labor cost) 8,000 Prime Cost 54,800 Factory Overhead Cost 6,400 Total Factory Cost 61,200 Opening Work in Process 7,500 Cost of Goods Available for Manufactured 68,700 Closing Work in Process (3,500) Cost of Goods Manufactured 65,200 Opening Finished Goods 10,000 Cost of Goods Available for Sold 75,200 Closing Finished Goods (12,000) Cost of Goods Sold Rs. 63,200

Conversion Cost = Direct Labor + FOH = 8,000 + 6,400 = Rs. 14,400

>> Practice Cost of Goods Sold MCQs for thorough understanding of Cost of Goods Sold Problems and Solutions.

## Problem # 2:

Following are data Extracted from Ahmadullah Pvt. Ltd. at the end of December 31st, 2017.

During the year 25,000 units were completed.

Requirements:

(1) Total Factory Cost                                        (2) Cost of Goods Manufactured

(3) Cost of Goods Sold                                      (4) Gross Profit and Net Profit

(5) Per Unit Cost of Goods Manufactured

### Solution:

Cost of Goods Sold Statement

For the Ended December, 2017

 Opening Inventory 176,000 Net Purchases 2,400,000 Transportation inward 32,000 Material Available for use 2,608,000 Closing Inventory (196,000) Direct Material used 2,412,000 Direct Labor 3,204,000 Prime Cost 5,616,000 Factory Overhead Cost 1,885,600 Total Factory Cost 7,501,600 Opening Work in Process 129,800 Cost of Goods to be Manufactured 7,631,400 Closing Work in Process (136,800) Cost of Goods Manufactured 7,494,600 Opening Finished Goods 620,000 Cost of Goods to be Sold 8,114,600 Closing Finished Goods (467,400) Cost of Goods Sold Rs.7,647,200

Gross Profit    =   Net Sales – CGS     = (14,000,500 – 25,200) – 7,647,200         =      Rs. 6,328,100

Net Profit        =   Gross Profit – Indirect Expenses   6,328,100 – (200,000 + 65,000+155,000)

=      Rs. 5,908,100

Per unit Cost of goods manufactured =                   7,494,600 / 25,000         =     Rs. 300 Per Unit

>> Practice using Cost of Goods Sold Format for better understanding.

## Problem # 3:

Account Department of the Aqib Khan Co. provides the following  data at end of June 2017, you are required to prepare Cost of Goods Manufactured; Cost of Goods Sold; find out Gross Profit / Loss & Net profit / Loss and Per unit Manufacturing Cost at the Year ended May 30th, 2009, assuming that Net Sales of Rs. 72,000, Marketing Expense 5%, Advertising Expense 1 % and Other Expense 3% of Net Sales; Net Purchases Rs. 36,000 and Direct Expenses are 1 % of Net Purchases; FOH 2/3 of Direct Labor and Direct Labor cost is Rs. 15,000. Units are produced during the period was 5,000.

### Solution:

Aqib Khan Co.

Cost of Goods Sold Statement

For the Ended June, 2017

 Beginning Inventory 8,000 Net Purchases 36,000 Direct Expense (36,000*1%) 360 Material available for used 44,360 Ending Inventory 8,500 Material Used 35,860 Direct Labor 15,000 Prime Cost 50,860 FOH (2/3 of 15,000) 10,000 Total Factory Cost 60,860 Work in Process beginning 8,000 Cost of goods to be manufactured 68,860 Work in Process Ending (15,000) Cost of goods manufactured 53,860 Finished Goods Beginning 7,000 Cost of goods available for sales 60,860 Finished Goods Ending (10,200) Cost of Goods Sold Rs. 50,660

Gross Profit = Net Sales – CGS = 72,000 – 50,660                          =            Rs. 21,340

Net Profit =Gross Profit – All indirect expenses of office    =    21,340 – (72,000 *5%)-(72,000 *1%)-(72,000 *3%) = 21,340 – 3,750 – 750 – 2,250                               =           Rs. 14,590

Per Unit Cost = Cost of goods manufactured / No. of Units Produced = 53,860 / 5,000 = Rs. 11 per Unit

>> See Cost of Goods Sold Chapter.

## Related Topics

Cost of Goods Sold

Cost of Goods Sold Format

## Related Courses

Principles of Accounting

Cost Accounting

Principles of Finance