Question

Toby wants to calculate her COGS for a fertilizing job she did last week. She used 40 pounds of fertilizer that she bought in bulk ($1,000 for 2,000 pounds). It took her employee 1.5 hours to spread the fertilizer (she is paid $15/hour) with the motorized spreader. Toby paid $4,000 for the spreader three years ago and it is estimated to last 10 years or 10,000 pounds. To get to the job site, a company truck and trailer was used (cost: $40,000 expected to last 10 years or 200,000 miles, the site visit was 30 miles round trip). This was the only use of the truck, trailer, and spreader for that day. Additional employee costs include 10% payroll tax and $730 per year in worker’s compensation insurance. You may assume an employee works 2000 hours per year.

Create an Input area in Excel of given information, and do calculations done by formula within Excel (including cell references). Separate and label the parts of the calculation as Direct Material (DM), Direct Labor (DL), or Overhead (OH). Please make two calculations comparing the straight-line depreciation method with the units of production method.

Answer 1

calculation of cost of goods sold for a fertilizing job

particulars	S.L.M	U.P.M
DIRECT MATERIAL    2000$/1000*40Pounds	80	80
DIRECT LABOUR 1.5hr*15$	22.5	22.5
OVER HEAD
addtional employee cost
pay roll tax    (10% on D.L)	2.25	2.25
workers compensation insurance    730$/2000hr*1.5hr	0.55	0.55
Depreciation
spreader Working note	7.69	16
truck and trailer    Working note	76.92	42
cost of goods sold	189.91	163.3

   1)depreciation (S.L.M)=Cost of the asset - residual value/use full life

spreader=4000-0/10years

=400$ per anum

   praportionatly depreciation per week=400/52weeks

   =7.69$

   2) truck and trailer depreciation per week=40000-0/10year

   =4000$ per year or 76.92$per week

2)depreciation under units prodution method

   rate of dep=cost of asset /number produced of units over life of asset

spreade=4000$/10000pounds

   =0.4$*40pounds

=16$

         2) truck and trailer depreciation =40000$/200000miles
=0.2$ per mile
   30miles*7days*0.2 =42$