Cost of Goods Sold Examples

Example # 1:

Muhammad Sohail Industries submits the following information on June 30^th, 2019:

[table id=21 /]

Requirement: Prepare cost of goods sold for the year ended June 30^th, 2019.

Solution: 

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Example # 2:

During the month of August 2019, the Hazrat Bilal Corporation used Rs. 50,000 of raw material. The mixing department used 12,000 labor hours at a cost of Rs. 30,000 and finishing department used 2,000 labor hours at cost of Rs. 9.00 per hours. Factory overhead is applied at the rate of Rs. 3.30 per hours in the mixing department and Rs. 4 per hours in the finishing department.

[table id=22 /]

The Corporation produced 25,000 units of product during the month.

Requirement:

• A schedule showing the cost of goods manufactured and the cost of goods sold.
• Calculate per unit cost of materials, labor and overhead for the August 2019 production.

Solution:

Per Unit Cost = Cost of Goods Manufactured / Units Manufactured

Per Unit Cost of Material = 49,000 / 25,000 = 1.96

Per Unit Cost of Labor = 49,500 / 25,000 = 1.98

Per Unit Cost of FOH = 48,800 / 25,000 = 1.952

Total Per Unit Cost = 1.96 + 1.98 + 1.952 =   5.892

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Example # 3:

The cost department of Muhammad Talha Company on December 31^st, 2019:

[table id=23 /]

Other information:

• Finished goods inventory Jan. 1 = 300 units
• Finished goods inventory Dec. 31 = 420 units
• Sold during year = 3880 units at Rs. 220 per unit

Required:

• Cost of goods sold
• The unit cost of Finished Goods Inventory as on December 31^st, 2019
• The total value of Finished Goods Inventory as on December 31^st, 2019

Solution: (1) 

Solution: (2) 

Per Unit Cost = Cost of Goods Manufactured / Units Manufactured

Per Unit Cost = 703,300 / 4,000 (see working below)

Per Unit Cost = Rs. 175.825

Unit manufacturing working:

Total number of units sold = 3880 units

Add Finished goods inventory Dec. 31 = 420 units

Less Finished goods inventory Jan. 1 = 300 units

Units manufactured or Production Budget = 4,000 Units

Solution: (3) 

Finished goods inventory cost = Closing finished goods units * Per unit cost

Finished goods inventory cost = 430 * 175.825

Finished goods inventory cost = Rs. 73,846.50

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