Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
$$\begin{array} { l r }
\text { Direct materials used } & \$ 37000 \
\text { Direct labour costs } & 45000 \
\text { Factory rent and utilities } & 18000 \
\text { Factory equipment depreciation } & 10000 \
\text { Marketing expenses } & 3000 \
\text { Administrative expenses } & 9000
\end{array}$$
50 000 units were produced during the year out of which 40 000 units were sold for $10 each. There was no beginning or ending raw materials or work-in-process inventory.
-What is cost of goods sold for the year?

Question

Hillsborough Street Manufacturing Inc. incurred the following costs in 2009:
$$\begin{array} { l r } 
\text { Direct materials used } & \$ 37000 \
\text { Direct labour costs } & 45000 \
\text { Factory rent and utilities } & 18000 \
\text { Factory equipment depreciation } & 10000 \
\text { Marketing expenses } & 3000 \
\text { Administrative expenses } & 9000
\end{array}$$
50 000 units were produced during the year out of which 40 000 units were sold for $10 each. There was no beginning or ending raw materials or work-in-process inventory.
-What is cost of goods sold for the year?

Quizplus · Accepted Answer

Cost of Goods Sold (COGS) is calculated by adding direct materials, direct labor, and manufacturing overhead. Here, manufacturing overhead includes factory rent and utilities ($18,000) and factory equipment depreciation ($10,000). Therefore, COGS = $37,000 (direct materials) + $45,000 (direct labor) + $18,000 (factory rent and utilities) + $10,000 (factory equipment depreciation) = $110,000. However, since only 40,000 out of 50,000 units were sold, we need to adjust COGS for the units sold. The per unit cost is $110,000 / 50,000 units = $2.2 per unit. Thus, COGS for the units sold is $2.2 per unit * 40,000 units = $88,000.

Hillsborough Street Manufacturing Inc 50 000 Units Were Produced During the Year Out of \begin{array}