Student Doubts Forum

Problem 6

Problem 6

by Marta Maria Sequeira Antão -
Number of replies: 7

Good morning, sorry to bother on the weekend.

On problem 6, when I am calculating the COGM it gives me 40 900 instead of 42 400. I already changed the social charges and the total wages costs with theoretical charges gives me 25 600 (which I think that it is correct). Then I calculated COGM = 15 000 (DM) + 12 800 (DL) + 8 000 (depreciation) + 5000 (misc. costs). I don't know what is missing.

After, when calculating the PBT and the EBT it also gives me wrong numbers, very low numbers. I think that I upload in this message they way I did my calculations. 

Thank you.

In reply to Marta Maria Sequeira Antão

Re: Problem 6

by Madalena dos Santos de Paiva -
Good Morning Marta,

Regarding the COGM, the value for Direct Materials should be €16,500 instead of €15,000. When calculating the COGM, you need to use the value for the consumption of Direct Materials (DM) (the DM actually used in production ) rather than the value of DM purchases. You can find the DM consumption using the purchase value, opening stock, and closing stock of DM. More precisely, closing inventory DM = opening inventory DM + purchases - consumption. By changing the DM, your COGM value will now be correct.

Regarding the PBT, I can not see your calculations. Could you please try uploading it again? If you are not able to do it, feel free to email me your calculations instead!

Best Regards,

Madalena Paiva
In reply to Madalena dos Santos de Paiva

Re: Problem 6

by Marith Marianne Luteijn -
Hi! I also had the same problem the PBT. 

Here is my calculations:
Sales = 63.000
Inventory = (1.500-3.000)+(600-700) = -1.600
Operating revenue = 61.400
CMSMU = 15.000
Misc. = 8.500
Personnel = 19.800
EBITDA = 18.100
Depr. = 14.000
EBIT = 4.100
Financial costs = 2.200
Financial rev. = 1.900
PBT = 3.800

I have no clue on how to get to 2.240.

Thanks in advance!

Kind regards,

Marith Luteijn


In reply to Marith Marianne Luteijn

Re: Problem 6

by Pedro Pinto da Silva Perdigão -
Hello Marith,

Regarding the P&L according to FA, there seem to be a few mistake there:

The Change in Inventories is respectful to the change in WIP and FG only, because the change in inventories of Direct Materials will already be reflected in the CMSMU

Therefore, change in inventories = (4240 - 0) + (600-700). You know that there were 500 units of FG in the closing inventories, so solving the COGM in 6.1 you can find the COGM/unit and, thus, the value in FG inventories.

There is also a small mistake in the CMSMU. 15.000€ corresponds to the value of the purchases, but you need to account for the fact that there was a change of -1.500€ in Direct Materials inventories. Therefore, consumption of direct materials amounts to 16.500€ and not 15.000€. After correcting these mistakes, you would get to EBT of 8.040€. The value of 2.240€ is the PBT you would get with the P&L by function, not with the P&L according to FA.

Hope this helps!

Pedro Perdigão
In reply to Pedro Pinto da Silva Perdigão

Re: Problem 6

by Hugo Guerra Neto de Oliveira -
About the P&L by function why we don't account a manufacturing theorethical social charge has we did on the previous exercise?
In reply to Hugo Guerra Neto de Oliveira

Re: Problem 6

by Pedro Pinto da Silva Perdigão -
Hello Hugo!

You do account for theoretical social charges in the P&L by function, but they will be reflected in more than one place:

  • Manufacturing costs will include Conversion Costs (CC) whose salaries and wages include TSC of 60%
  • Distribution costs include salaries and wages with TSC of 60%
  • Administrative costs include salaries and wages with TSC of 60%
Hope this helps!

In reply to Marta Maria Sequeira Antão

Re: Problem 6

by María Fabini Otegui -
Could you please help me to get the 12800 of DL? Should that be 9900 plus the TSC of 60%?
In reply to María Fabini Otegui

Re: Problem 6

by Madalena dos Santos de Paiva -
Hello María,

As stated in the excercise, the 9900€ of saleries and wages already include 23.75% of real social charges paid during the month. If you want the value of the DL (which includes the TSC), you have to remove the real social charges and add the TSC.

Thus, you should do: 9900€ / (1 + 23.75%) = 8000€ of base wages (without any tipe of social charges)
DL (including TSC) = 8000€ * (1 + 60%) = 12800€

Hope it was clear!

Madalena Paiva