COGS Material purchses Material consumption
Divesh (financial specialist) (36 Points)
12 January 2019Difference between below
1. Purchase cost.
2.Cost of material consumption.
3.Cost of good sold.
Divesh (financial specialist) (36 Points)
12 January 2019
Rakesh Bandal
(Self Employed and Agriculture)
(1349 Points)
Replied 12 January 2019
Dear Divesh, Consider Following Example
Consider Computer Assembly and sale of Assembled Computer.
Purchases :
1. Screen - 5000
2. Mouse - 200
3. Key Bard - 100
4. Mother Board - 5000
5. Sundry Consumables - 200
Total Purchases - 10500, (Assume all units are purchased in 5 Quantity)
So total Purchase price will be Rs. 10500 X 5 = Rs. 52,500/- [ Rs. 52,500/- will be PURCHASE COST ]
Out of Above Purchases Suppose 2 Computers are Assembled and ready for sale
Rs. 10,500 X 2 = Rs. 21000 [ Rs. 21,000/- will be COST OF MATERIAL CONSUMPTION ]
to make there 2 computer assembly labour/technical person cost is Rs. 1,000/- for each computer
so total cost will be Rs. 21000 (Material) + 2000 (Labour) = Rs. 23,000/- [ Rs. 23,000/- COST OF GOODS SOLD ]
SANGEETH THOMAS
(CHIEF ACCOUNTANT)
(36 Points)
Replied 15 January 2019
Raw Materials A (10kg): Rs.10000
Raw Material B (10kg): Rs.20000
Total Purchase Cost : Rs.30000
Finished Goods Z (2 Packet) produced with 5 Kg of Raw Material A & 4 Kg of Raw Material B
So , Total Material Consumption – 10000*5/10 + 20000*4/10 = Rs.13000/-
Lets consider ,Other Direct Cost (like, Factory Electricity, Wages etc) for making Finished Goods Z(2 packet) is Rs.4000
Out of 2 Packets of FGs, 1 Packet Sold, Therefore, Cost of Goods Sold = Rs.13000/2+4000/2 = Rs.8500/-