Question

how the Cost of Goods Manufacturing Statement, Cost of Goods Sold Statement, and Income Statement can be used to manage an organization and increase profitability. (please type out answer)

Answer 1

Cost of Goods Manufacturing Statement helps management to manage and control manufacturing or production cos which include direct and indirect cost. For a manufacturing company , the cost control of direct and indirect cost will have wide impact on profitability. Based on the Report the managers can check whether raw materials and labors are used effectively as per planning.

Cost of Goods Sold Statement , on the other hand helps the management to understand whether purchase and inventory control mechanism is effectively used . They can derive the gross profit based on this Report and can compared it with budgeted G/P and remedial action can be taken if the actual figure is not as per the budgeted figure.

Income statement will reflect selling and administration expenses , depreciation and taxes. It will show the Net profit for that particular year. Management can check each and every expense and can take suitable action if any of the expense shown in the statement is deviated from the budgeted amount.

In short all these 3 statements are vital for managing an organization and also to take corrective action , if needed , so as to increase the profitability .