Question

Baltimore Manufacturing Company just completed its year ended December 31, 2019. Depreciation for the year amounted to $130,000: 15% relates to sales, 20% relates to administrative facilities, and the remainder relates to the factory. Of the total units produced during FY 2019: 75% were sold in 2019 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

The first step would be to compute depreciation related to factory and later on, part of that related to current year sales would be allocated to cost of goods sold as depreciation.

Total depreciation	$        130,000
Less:
Depreciation related to sales ( 130,000 *0.15)	$          19,500
depreciation related to admin (130,000 * 0.2)	$          26,000
Depreciation related to factory	$          84,500

In the given case, 75% goods were sold in 2019, hence, 75% of depreciation related to factory would be included in cost of goods sold.

Depreciation to be contained in cost of goods sold = 84,500 * 75% = $ 63,375.

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