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Chapter 16: Q16-6SE (page 887)

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

Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:

g. Depreciation on the manufacturing plant.

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

5. Summary reports prepared quarterly or annually.

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

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

Salaries and wages \( 12,000

Windshield repair materials 4,600

Depreciation on truck 300

Depreciation on building and equipment 1,200

Supplies used 300

Utilities 460

The Windshield Doctors earned \)23,000 in service revenues for the month of March by repairing 500 windshields. All costs shown are considered to be directly related to the repair service.

Requirements

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

2. Compute the cost per unit of repairing one windshield.

3. The manager of Windshield Doctors must keep unit operating cost below $50 per windshield in order to get his bonus. Did he meet the goal?

Comparing managerial accounting and financial accounting

Match the following terms to the appropriate statement. Some terms may be used more than once, and some terms may not be used at all.

Directing Managerial

Creditors Managers

Controlling Planning

Financial Stockholders

a. Accounting systems that must follow GAAP.

b. External parties for whom financial accounting reports are prepared.

c. The role managers play when they are monitoring day-to-day operations and keeping the company on track.

d. Internal decision makers.

e. Accounting system that provides information on a company’s past performance.

f. Accounting system not restricted by GAAP.

g. The management function that involves choosing goals and deciding how to achieve them

Identifying ethical standards

The Institute of Management Accountants’ Statement of Ethical Professional Practice requires managerial accountants to meet standards regarding competence, confidentiality, integrity, and credibility. Consider the following situations. Which standard(s) is(are) violated in each situation?

b. You see others take home office supplies for personal use. As an intern, you do the same thing, assuming that this is a “perk.”
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