Question

Baltimore Manufacturing Company just completed its year ended December 31, 2019. Depreciation for the year amounted to $230,000: 20% relates to sales, 20% relates to administrative facilities, and the remainder relates to the factory. Of the total units produced during FY 2019: 75% were sold in 2019 and the rest remained in finished good inventory. Use this information to determine the dollar amount of the total depreciation that will be contained in Cost of Goods Sold. (Round dollar values & enter as whole dollars only.)

Answer 1

Dollar amount of the total depreciation that will be contained in Cost of Goods Sold

Depreciation and amortization are generally not included in cost of goods sold and are expensed in P&L. However, depreciation on a factory is included in COGS since it's directly related to production

Depreciation relating to Sales = 20%

Depreciation relating to Administrative  = 20%

Depreciation relating to factory(balance remaining) = 100-20%-20% = 60%

Depreciation for the year = $230,000

Depreciation relating to factory = $230000*60% = 138000

Goods Sold in 2019 = 75%

Since 75% goods are sold, therefore Closing Stock. = 100-75%= 25%

Closing Stock of 25% will not be included in Cost of Good Sold. Only 75% of Depreciation will be included in COGS

Dollar amount of the total depreciation that will be contained in Cost of Goods Sold = 138000*75% = 103500