Question

Consider where you currently work, where you have previously worked, or a well-known company where you would like to work. Describe this company and identify whether it would prepare a schedule of cost of goods sold, cost of goods manufactured, both of these, or neither of these. Justify your selection using the Topic Materials.

Answer 1

The company is a leading automobile manufacturer in the country with approximately 1,50,000 cars sold per month. The Company would prepare both the schedules i.e. Cost of goods manufactured, Cost of goods sold.

Justification:

These Schedules helps company to identify the cost for two different purposes for e.g. Company currently sells 50% of car manufactured to its subsidiary company which in turn sells it in market. Rest 50% is sold by the authorized dealers. Schedule of Cost of good manufactured is relevant to compute the cost of manufacturing and gross profits earned. Whereas Company has also incurred cost on marketing the product i.e. Commissions, advertisement cost etc. These should ideally get apportioned to my product manufactured since its directly attributable to a particular model. In such instances Schedule of cost of goods sold become relevant and is required to be prepared by the company.