Cost
of Goods
Sold Report
|
| Sales | 12,000 | |
| Beginning Inventory | 10,000 | |
| Material Purchases | 2,500 | |
| Direct Labor | 1,200 | |
| Burden Costs | 2,400 | |
| Ending Inventory | 8,000 | |
| COGS | 8,100 | -8,100 |
| Contribution Margin | 3,900 |
COGS is beginning inventory + purchases + labor + burden - ending inventory.
This report is usually a monthly report and should be available in the computer system. This company is showing a healthy contribution margin.
A COGS report by part:
| Parts Sold | Sales | Direct Labor Cost | Material Cost | Burden Cost | Total COGS | Contribution Margin | % | |
| Part #1 | 100 | $8000 | $800 | $3000 | $3800 | $7600 | $400 | 5% |
| Part #2 | 700 | $1500 | $150 | $750 | $1125 | $2025 | -$525 | -35% |
| Part #3 | 50 | $2500 | $250 | $800 | $1000 | $2050 | $450 | 18% |
This is a very good report if:
- The burden allocations are fair and reasonable.
- Too many times individual parts will be
unjustly tagged as big losers
when the burden allocation rates are not accurate.
- The material and labor inputs are up-to-date and accurate.
How to read the report:
The costs are at standard, that is, what the part should be using for costs. If your cost system is accurate and up-to-date then the report is good.
You can see that part 2 has a negative contribution. This needs to be investigated to find out why. Is the burden allocated properly? Is the sales pricing accurate? Material?
Maybe it's a bad job and wasn't priced well when the job was taken.
Contribution margin needs to allow room:
- Contribution margin should be large enough to:
- Cover administrative costs
- Provide the profit desired
Other cost accounting reports:
Production Report
Scrap Report
Biggest Losers Report
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