Question

What Information do I need to find Cost of sales?

Sales		$                1,743,419.02
Cost of Goods Sold		$                 1,309,505.55
Gross Margin		$                    433,913.47
Selling and Administrative Expenses
Salaries		$                    245,877.50
Vehicle and Travel		$                      21,197.83
Advertising		$                                     -
Legal and Audit		$                         8,542.10
Telephone and postage		$                     18,030.85
Office		$                      10,388.56
Interest and bank charges		$                      10,325.69
Dues, fees and capital tax		$                         5,525.45
Donations		$                            576.92
Bad Debts		$                      24,328.24
Amortization - office equipment		$                         4,339.10
Amortization - vehicles		$                         9,249.04
Misc. Expenses		$                                     -
Cost of Sales		$                      75,532.19

Sales – 1,743,419.02

Purchases 539,633.45

Wages 503,002.96

WIP inventory 6,203.94

Duty & Brokerage 3,869.85

Freight 27,749.14

Heat & light 18,012.57

Factory repairs 40,888.34

Insurance 15,966.93

Municipal taxes 20,033.82

Union dues 16,673.86

Canada pension plan 11,611.57

Worker’s compensation 26,780.16

Employer health tax 38,651.75

Amortization – production equipment 32,118.72

Amortization – building 8,308.49

Salaries 245,877.50

Gasoline 21,197.83

Advertising 0

Legal 8,542.10

Telephone 18,030.85

Mortgage interest 8,633.52

Office 10,388.56

Bank charges 1,692.17

Due & fees 5,525.45

Donations 576.92

Bad debts 24,328.24

Amortization – office 4,339.10

Amortization – corporate fleet 9,249.04

Rent -3,301.05

Income tax provision – current 26,333.24

Answer 1

Solution

The formula for finding the cost of sales is

Stock at the beginning of the period

+ Purchases made during the period ( Cost of direct materials)

+ Cost of direct labour

+ Overhead Manufacturing cost

- Stock at the end of the period

Cost of direct materials, cost of direct labour and overhead manufacturing costs are all directly incurred to produce the goods. Therefore indirect expenses are excluded from the calculation of cost of sales.

The above mentioned information would be required to determine the cost of sales.