COST OF SALES: Comments on AZNT's penny stock accounting procedure?
COST OF SALES
PURCHASES 2,287 8,507
PROCESSING COSTS 135 1,311
FREIGHT-IN 2,093 720
SHIPPING EXPENSE 7,112 10,795
COMMISSIONS 0 175
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TOTAL COST OF SALES 11,627 21,509
For manufacturers, the method for compiling the cost of goods sold (or, more accurately, the cost of goods manufactured) is different than the way it is done for retailers and wholesalers. This is
because a manufacturer's costs come from both the acquisition of raw materials to create a product and the costs related to its manufacture.
For a manufacturer, the cost of goods sold is divided into two categories: direct costs and indirect costs. Direct costs include inventory costs based on beginning and ending inventories — computed
in the same manner as retailers, and it also includes the costs of raw material, and work-in-process inventories, PLUS direct labor costs. Indirect costs include indirect labor, factory overhead, and
materials and supplies. Because of these additions, the cost of goods manufactured is often compiled as a separate statement. Information from the separate statement is then incorporated into the P & L
statement. Here is information on each of the data categories for manufacturers:
Labor - Direct labor is the cost of labor to convert raw materials into finished products. Indirect labor includes other factory personnel such as shipping personnel or maintenance
workers.
Factory Overhead - Includes the following: depreciation of plant and equipment; factory utilities — light, heat, and power; insurance; real estate taxes; and the wages of supervisors and others who do not work directly to create the product.
Materials and Supplies - Consumed in the production of goods are included in the direct cost of goods sold for manufacturers. Supplies that are not consumed during the manufacturing process are included as indirect costs.
For manufacturers, if containers or packaging is an integral part of the product, then these expenses are included in the costs of goods sold. If they are not integral to the product, then these expenses
would be recorded as selling expenses.
(I must admit, if their pharmaceutical manufacturing plant can generate almost $500,000 worth of sales with only a processing expense of $135.00, this company will kill all competitors... How do they do that?) |
