Describe 3 issues/problems that a company could encounter when trying to determine the actual cost of a good or service to be used in the costs of goods sold. Provide an example of a company or industry where these issues could be present.
There are several problems
or issues that an organization can face when annoying to define the actual
costs of goods sold.
First problem which I would like to
discuss is determination of how much compensation of different workers should
be credited to their job on a specified task. For instance, an organization
engaged in business of drugs makes different kinds of drugs. The sales
force of organization goes out in the market to sell out their drugs. At
this point the amount paid to the sales force should be credited to each variety
of drugs? This kind of problem creates hurdles to identify production
cost of selling drugs.
The second problem relates to the variability
in inputs prices over a specific time period. For instance, the Pepsi procures
sugar in larger amount. Let us suppose that the sugar price fluctuates from
purchase to purchase. It might be difficult to clarify the accurate per unit
price of sugar that puts into a certain amount of soda.
The above problem can happen with
fixed costs. If Pepsi procures latest equipment, how much of the cost of
that equipment must have to be credited to any specific batch of soda.
Above are few examples of problems
why it may be difficult to define the actual production cost of goods sold.
Aug 26th, 2014
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