Cost of sales — OpenTuition Forums

Zzihan6y ago

Hi sir, There's a question on BPP that ask me to complete a standard cost card, and also asked what's the standard cost of sale. However the correct answer of cost of sale is the total cost related to the product, including admin selling and distribution overhead, which is a non-production cost. I'm confused because from my understanding, cost of sales should only include production cost.. Could you please kindly help. Thank you so much!!!

John MoffatTutor6y ago#1

You are correct in that usually we only include production costs on the standard cost card and as cost of sales if we are using absorption costing. However if it is marginal costing then we include all variable costs (so as to arrive at the contribution). If the question is in the BPP Revision Kit, then tell me what question so that I can check the wording of it myself :-)

Zzihan6y ago#2

Thank you sir, the question is 24.8 (Swindle Co makes widgets), and standard cost of sale is required to be calculated in Task 1.

Zzihan6y ago#3

Hi sir, I'll show more extract here for you to find more easily: Swindle Co makes widgets. Two types of labour are involved in the production of a widget, skilled and unskilled. Skilled labour is paid $15 per hour and unskilled $3 per hour. Twice as many unskilled labour hours as skilled labour hours are needed to produce a widget, six unskilled labour hours being needed.

John MoffatTutor6y ago#4

Normally a standard cost card would only include the production costs. However in this question it is made perfectly clear by the last sentence of the question (admin etc costs are added at the rate of $20 per widget) and by the 'blanks' that you are required to fill in in the answer, that what is required is the full cost and then the mark-up and the selling price.

Zzihan6y ago#5

Okay. Thank you so much sir.

John MoffatTutor6y ago#6

You are welcome :-)