Raw Material Purchase is calculated using the formula given below of Units at the Beginning of the Year * Price Per Unit (Last Year) Calculate the cost of sales for the company based on the given information.īeginning Inventory is calculated using the formula given belowīeginning Inventory = No. The total manufacturing time attributed to production during the year was 1,760 hours and total manpower was 50. During the year, the labor cost was $20 per hour while the manufacturing overhead was $100 per hour.
The company maintains inventory based on the FIFO method. However, during the year the price of the raw material surged to $55 per unit and the company purchased 40,000 and ended the year with an inventory of 7,000 units. At the beginning of the year, the company had an inventory of 5,000 units that are worth $50 each. Let us take the example of another company to understand the concept of cost of sales in further detail. Therefore, the company incurred cost of sales of $235,000 during the year. Calculate the cost of sales for the company based on the given information.Ĭost of Sales is calculated using the formula given belowĬost of Sales = Beginning Inventory + Raw Material Purchase + Cost of Direct Labor + Overhead Manufacturing Cost – Ending Inventory During the year, the total labor cost and manufacturing overhead that can be attributed to the production stood at $70,000 and $60,000 respectively. During the year, the company spent another $100,000 in the purchase of raw material and various other inventory items and then ended the year with an inventory of $15,000. Let us take the example of a company that had an inventory of $20,000 in stock at the beginning of the year.
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You can download this Cost of Sales Formula Excel Template here – Cost of Sales Formula Excel Template Cost of Sales Formula – Example #1
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