What Cost of Goods Sold?

What Cost of Goods Sold?

This represents the cost of items sold during a period. All directly attributable costs and overheads are included in the cost of goods sold such as:

  • Raw materials consumed
  • Salaries, wages, and amenities
  • Traveling
  • Fuel and power
  • Excise duty and sales tax
  • Factory rent, rates, and taxes
  • Insurance
  • Repairs and maintenance of plant and machinery
  • Packing expenses
  • Depreciation of manufacturing assets and
  • Technical fee and royalty (if any)

Additionally, opening and closing stock of work in progress stock and finished goods stock is also adjusted under the following formula to get to the cost of goods sold:

Total manufacturing cost (as explained above)
Add:  Opening work in process stock
Less:  Closing work in process stock
=        Cost of goods manufactured

Add:  Opening finished goods stock
Less:  Closing finished goods stock
=        Cost of goods sold

One thought on “What Cost of Goods Sold?”

  1. Great article. Good to understand for everyone.

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