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Please solve this problem - Zikria Yamin - 08-08-2006 Dear Seniors AOA Please solve this problem and highlight the treatment of indirect Materials. Problem is; Electronic Amplifiers are the main product of H& Company. Information for the month of March is as follows, Inventories on March 1, 1985 Material--- 24080 WIP --- 47130 Finished Goods--- 34842 Further data is as, Raw material purchsed 148580 Repairs and maintainance 5924 Gas,Light& power 14565 Indirect Material 3480 Indirect Labour 25024 Direct Labour 74500 Supervisors Salary 14290 Inventories at March 31, 1985 are as Materails 37144 WIP 49460 Finished Goods 32956 Required Cost of Goods Sold Statement. My Dear Seniors, Please Highlight the treatment of Indirect materials. Whether these would be pooled into the Factory overheads only or Be deducted from the "material used" in order to arrive at the Direct material used because in calculating for CGS we require Direct material along with the Direcr labour. - wiki - 08-08-2006 Hi zikria , I have understand your question that if the only problem is to solve this question .it is so easy for you because all the point are mension in preparation of cost of good sold statement.(from the above question indirect materail is the FOH so it will be including only in FOH and not be duducted from the direct material ) - wiki - 08-08-2006 H& Company cost of goods sold statement for the period ended at March 31, 1985 Direct material material Inventories on March 1, 1985 24080 ADDmaterial purchased 148580 ......... materail available for used 172660 LESSmaterail invertory on march 31,1985 37144 ......... Materail used 135516 DIRECT LABOUR 74500 FACTORY OVERHEAD Repairs and maintainance 5924 Gas,Light& power 14565 Indirect Material 3480 Indirect Labour 25024 Supervisors Salary 14290 63283 ....... ........ TOTAL FACTORY COST 273299 ADDBEGINING WIP 47130 ........ COST TO BE ACCOUNTED FOR 320429 LESSENDING WIP 49460 ........ TOTAL COST OF GOODS MANUFACTURED 270969 ADDBEGINING FINISHED GOODS 34842 ........ COST OF GOODS AVAILABLE FOR SALE 305811 LESSENDING FINISHED GOODS 32956 ....... COST OF GOODS SOLD 272855 ....... - wiki - 08-08-2006 H& Company cost of goods sold statement for the period ended at March 31, 1985 Direct material ---material Inventories on March 1, 1985--------24080 ---ADDmaterial purchased----------------------148580 ---------------------------------------------.......... ---materail available for used-----------------172660 ---LESSmaterail invertory on march 31,1985-----37144 ---------------------------------------------.......... ---Materail used---------------------------------------------135516 ---DIRECT LABOUR----------------------------------------------74500 FACTORY OVERHEAD ---Repairs and maintainance-----5924 ---Gas,Light& power------------14565 ---Indirect Material------------3480 ---Indirect Labour-------------25024 ---Supervisors Salary----------14290--------------------------63283 ------------------------------.......---------------------------..... ---TOTAL FACTORY COST----------------------------------------273299 ADDBEGINING WIP----------------------------------------------47130 -------------------------------------------------------------........ COST TO BE ACCOUNTED FOR-------------------------------------320429 LESSENDING WIP-----------------------------------------------49460 -------------------------------------------------------------........ TOTAL COST OF GOODS MANUFACTURED-----------------------------270969 ADDBEGINING FINISHED GOODS-----------------------------------34842 -------------------------------------------------------------........ COST OF GOODS AVAILABLE FOR SALE-----------------------------305811 LESSENDING FINISHED GOODS------------------------------------32956 --------------------------------------------------------------....... COST OF GOODS SOLD--------------------------------------------272855 --------------------------------------------------------------....... - wiki - 08-09-2006 AOA , I THING IT WILL BE SOLVED AS WELL - Zikria Yamin - 08-09-2006 Dear Thanks For your detailed answer. I am confused just because of the treatement of Indirect meterial. When we add and less the raw material inventories, we arrived at material consumed, which may be a combination of Indirect and Direct Materials, whereas, while computing for the CGS we require the DIRECT Material to add with the Direct labour, FOH, WIP etc. So, please tell me on what grounds Indirect material is not deducted from the Material Used. I am confused. - wiki - 08-09-2006 AOA , For you kind information in cost acounting there is difference b/w Direct and indirect materail or also in direct and indirect labour .indirect materail and indirect labours are always known as the subject of FOH .in other words indirect materail and indirect labour never Add or duduct from DIrect materail in preparation of income statement .I thing you have to learn more about mateial and labour concept in Accounting. any how i will say you that indirect materail is FOH like that of other FOH and it will always includes in FOH and not in direct materail. - Zikria Yamin - 08-17-2006 AOA Thanks for your kind help. Actually in B.com Part 2, our teacher of cost accounting had told us wrong concepts about the cost accounting and various other elements of cost. After entering into professional studies i thought that more than 50% of our concepts are wrong and i am trying to make deep understandings to correct them. Thanks.