Chapter 18, Problem 11E

To determine

Concept Introduction:

Cost of Goods sold:

The cost of goods sold can be defined as the cost incurred in order to convert a raw material into finished goods. The cost of goods sold includes direct expenses i.e. direct material, direct labor and overheads like - variable manufacturing overheads and fixed manufacturing overhead as well. It is subtracted from the sales to know the gross profit of the business.

Cost of goods sold is calculated as under –

For trading business units –

$Costofgoodssold=Beginninginventory+Costof\text{ Purchases }–Endinginventory$

For manufacturing units –

$Costofgoodssold=Beginning\text{ Finished goods }+Costofgoodsmanufactured–Ending\text{ Finished goods}$

To compute:

1. Cost of goods sold for Unimart

2. Cost of goods sold for Precision Manufacturing