Cost of Goods Sold for Large Items

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At the end of each period (month), calculate the Cost Of Goods Sold for those items over $100 (such as stoves and tanks). Since these tend to be low volume sales items with relatively fixed costs, you don't need to use the weighted average costing method that applies to propane.

Instead, simply use the following: 

1. For each large item category, find the number sold during the month from the Sales Summary.  

2. Multiply this times the actual cost you paid for each item.  

3. This is the Cost Of Goods Sold for each item.  

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COGS: Large Items

Let's assume the following . . .

You have 2 categories of large items - tanks and stoves:

During the month you sold 5 stoves that cost $350 each.

During the month you also sold 4 tanks that cost $400 each.

 

In your General Ledger you have set up: 

• A COGS account and an Inventory account for tanks.
• A COGS account and an Inventory account for stoves.

 

Here's what the calculations would look like:

Cost of Goods for stoves for the month = $1,750 (5 times $ 350)

Cost of Goods for tanks for the month = $1,600 (4 times $ 400)

Enter each of these Cost Of Goods Sold amounts as debit Journal Entries to the appropriate General Ledger COGS accounts and as credits to the corresponding stove and tank Inventory accounts.

for an example of how this works.

4. When you've finished, print an Income Statement (report GL02 from General Ledger reports).  If the COGS account for each large item is zero, go to step 5 below. If it is not zero and there is a dollar amount in the COGS account, adjust (subtract) this amount from the Cost Of Goods Sold amount calculated above. Then go to step 5.

5. Key in a Journal Entry for the Cost of Goods Sold amount as a debit against the appropriate COGS account for each large item category in your General Ledger and a credit to the corresponding Inventory account.

For further help regarding Cost Of Goods, go to:

Overview of Cost Of Goods Sold

Cost Of Goods Sold for Propane

Cost Of Goods Sold for Small Items