Assignment

Presentation
-SAID BAYU SETYONO-
Cost of Goods Sold (COGS):
Definition

In the production activities of a company, the term cost of goods

sold (COGS) is known, which is also known as cost of goods sold
(HPP).

Cost of goods sold (COGS) is part of production so it is important for

every entrepreneur to understand it. That way, company
management will run well because it will affect the costs and sales
that occur.
What is Cost of Goods Sold (COGS)?
The definition of cost of goods sold (COGS) is all the costs incurred by a
company to produce a product or service starting from the product
manufacturing process until the product is ready to be distributed to the
market.

The goal is to provide an accurate estimate of company costs.

Usually, this calculation includes components such as raw material costs,

direct labor and overhead costs.

Meanwhile, costs that are not included in operating activities such as costs
such as sales, advertising or research and development are not components
of COGS itself.
 Benefits of Cost of Goods Sold (COGS)
Calculations

The benefits obtained if the company calculates the cost of goods

sold (COGS) include the following:
Determining the selling price, the company can specifically find
out what selling price is suitable to be charged to buyers based
on production costs, product specifications and demand.
A tool to monitor the realization of production costs, whether the
production process for certain products produces total order
production costs that match previous calculations or not.
Helps calculate profit or loss, if the selling price is greater than
COGS then the company will make a profit, whereas if the selling
price is lower then you will experience a loss.
Costs Included in the Cost of Goods Sold
(COGS) Component

The following are the cost components included in COGS:

Inventory,Inventory is a stock of goods originating from stock in
the previous period.Inventory costs can be seen from the initial
inventory added by purchases of merchandise during the current
period and then minus the remaining ending inventory.In trading
companies, the amount of inventory of goods sold consists of
inventory of finished goods (inventory).Meanwhile, in
manufacturing companies, the amount of inventory of goods
sold consists of inventory of raw materials, inventory of goods in
the production process (work in process), and inventory of
finished goods (inventory).
Direct Labor (Direct Labor Cost),Direct labor is the costs or
wages paid to employees by companies who are directly
involved in the production process of merchandise.It is called
direct labor because the amount of wages paid to employees
depends on how many units of product can be produced or
wages are paid per day on an hourly basis.Direct labor costs are
mostly found in manufacturing companies.
Overheads,Overhead costs (also known as
indirect costs) are other costs that arise
apart from inventory costs and direct
labor costs.This type of cost has various
types based on the scale of the business,
type of business, and type of resources
used by a company.
Cost of Goods Sold (COGS)
Calculation Formula
The formulas used in calculating the cost of goods sold
(COGS) are:
Net sales = gross sales – sales returns – sales
allowances
Net purchases = purchases – purchase
transportation costs – purchase returns – purchase
discounts
COGS = beginning inventory of goods + net
purchases – ending inventory
Gross profit = net sales – cost of goods sold
Net profit before tax = gross profit – accumulated
costs
Steps to calculate Cost of Goods Sold
(COGS)

The first step, calculate the raw

materials used.
The second step, calculate production
costs.
The third step, calculate the cost of
production.
The fourth step, calculate the profit.
Example of Calculation of Cost of Goods Sold
(COGS)
Mulya Abadi Factory is a manufacturing company that processes tapioca flour into
crackers.

At the beginning of November the Taruna Jaya Factory had a raw material inventory
of IDR 450,000,- purchased a raw material inventory of IDR 15,105,000,-
The production of these crackers is assisted by 10 employees whose total monthly
costs are IDR 15,800,000 for labor costs.
During the production process, overhead costs incurred during a month amount to
Rp. 9,950,000,-
At the end of November there was remaining use of raw materials amounting to Rp.
8,087,500,-

What is the cost of goods sold (COGS) of the Mulya Abadi company?
The first step, calculate the raw
materials used

To find out, the initial balance of raw materials in the first month +
raw material purchases – ending balance of raw materials.

IDR 450,000 + IDR 15,105,000 – IDR 8,087,500 = IDR 7,47,500

The second step, calculate
production costs

To find out production costs, raw materials used + direct labor costs
– production overhead costs.

IDR 7,467,500 + IDR 15,800,000 – IDR 9,950,000 = IDR 33,217,500

The third step, calculate the
cost of production

To find out the cost of production, the formula used is total

production costs + initial balance of goods inventory in the
production process – ending balance of goods inventory.
However, because there is no inventory in the production process at
the beginning and end of the month, the total cost of production is
Rp. 33,217,500,-
So we can get a cost of goods sold of Rp. 33,217,500,- with the
number of crackers produced being 250,000 pieces.
This means that the cost of producing unified crackers is IDR
33,217,500 / 250,000 = IDR 132.87,-
Based on the set selling price, namely 600 per piece and with
production costs of Rp. 132.87,- pcs, the profit that should be
obtained is Rp. 417.13,- per pc.
The fourth step, calculate the
profit

To find out the profit earned by the Taruna Jaya Factory, sales of
crackers during the period are reduced by the cost of goods sold.
Sales of 250,000 pcs x IDR 600 = IDR 150,000,000 – IDR 33,217,500 =
IDR 116,782,500
It is assumed that the gross profit obtained is IDR 116,782,500 per
month.
The amount of gross profit has not been deducted by expenses,
such as administration and marketing.
If it is assumed that the administrative and marketing costs are Rp.
10,000,000,- then the net profit obtained by the company is Rp.
106,782,500,- per month.
 so that the recording in the
general journal is

Date. Account. Debit. Kredit.

30/12 Cost Of
Rp 55,383
Good Sols
Inventory Rp 55,383
cost of good sold (COGS) in
everyday life
Mulya Abadi Factory is a manufacturing company that processes
tapioca flour into crackers.

At the beginning of November the Taruna Jaya Factory had a raw

material inventory of IDR 450,000,- purchased a raw material
inventory of IDR 15,105,000,-
The production of these crackers is assisted by 10 employees
whose total monthly costs are IDR 15,800,000 for labor costs.
During the production process, overhead costs incurred during a
month amount to Rp. 9,950,000,-
At the end of November there was remaining use of raw materials
amounting to Rp. 8,087,500,-
- Thank You -