Question

Baltimore Manufacturing Company just completed its year ended December 31, 2018. Depreciation for the year amounted to $290,000: 25% relates to sales, 20% relates to administrative facilities, and the remainder relates to the factory. Of the total units produced during FY 2016: 75% were sold in 2018 and the rest remained in finished good inventory. Use this information to determine the dollar amount of the total depreciation that will be contained in Cost of Goods Sold.  (Round dollar values & enter as whole dollars only.)

Answer 1

Depreciation relates to factory

= Total depreciation – Depreciation relates to sales – Depreciation relates to admin.

= $ 290,000 – $ 290,000 x 0.25 – $ 290,000 x 0.2

= $ 290,000 –   $ 72,500 – $ 58,000

= $ 159,500

As 75 % of finished goods were sold, 75 % of factory depreciation will be included for Cost of Goods Sold

Total depreciation contained in Cost of Goods Sold

                                           = $ 159,500 x 75 %

  

                                             = $ 119,625