The cost of goods sold (CGS) is the cost of all merchandise sold in a storeroom. It is calculated as follows and is excluded from operating costs for storerooms in the markup calculation:
How to Calculate the Cost of Goods Sold
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+
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Beginning inventory
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+
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Purchases for resale (net of purchase discounts and allowances)
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+
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Freight (if not included in purchase price of items for resale)
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-
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Items removed because of obsolescence, spoilage, etc.
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-
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Purchase returns
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-
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Ending inventory (net of any inventory)
Overages (+) or shortages (-)
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=
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Cost of goods sold
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The amount of adjusted fund balance should be compared to the 60-Day Working Capital Reserve limitation to determine if adjustments need be made to avoid an over recovery in excess of specified limits. See "Working Capital Reserve Limitation" section above.
The following is an example of the limitation calculation:
How to Calculate 60-Day Working Capital Reserve Limitation
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FYxx Cash Expenditures per service activity fund per operating ledger (12 months)
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$66,000
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=
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60-Day Working Capital Reserve Limitation (Total YTD expenditures divided by 6); an absolute value
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$11,000
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The amount of adjusted fund balance should be compared to the 60 Day Working Capital Reserve limitation to determine if adjustments need be made to avoid an over recovery in excess of specified limits. See the "Working Capital Reserve Limitation" section above.
The following is an example of over recovery:
How to Calculate Adjusted Fund Balance and Over Recoveries
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Fund Balance, End of Year (or YTD) has a credit (surplus) balance
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($41,200)
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+
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Net asset value of Fund Type 3E equipment/facilities -- a credit adjustment to fund balance*
*For adjustments to Non-Fund Type 3E equipment, contact System Government Costing
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($12,000)
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=
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Adjusted fund balance (surplus)
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($53,200)
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Compared to 60-Day Working Capital Reserve Limitation (see above calculation)
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$11,000
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Over recovery (surplus)
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($42,200)
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The ($42,200) surplus balance should be considered in calculating the recharge rate.
The following is an example of under recovery:
How to Calculate Adjusted Fund Balance and Under Recoveries
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Fund Balance, End of Year (or YTD) has a debit (deficit) balance
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$20,000
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+
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Net asset value of Fund Type 3E equipment/facilities -- a credit adjustment to fund balance*
*For adjustments to Non-Fund Type 3E equipment, contact System Government Costing
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($6,000)
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=
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Adjusted fund balance / Under recovery (deficit)
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$14,000
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The $14,000 deficit should be considered in calculating the recharge rate.
User fees are derived by dividing the aggregate total of actual fiscal year operating expenses, equipment depreciation, and prior year over/under recovery by the actual user fee base:
How to Calculate User Fees
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Total costs
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+
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Fiscal year operating expenses
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+
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Annual depreciation expense for all equipment assigned and used by the service activity
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+/-
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Prior year under/over recovery
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=
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Total costs
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User Fee Base
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=
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Number of service units (billed and unbilled); for example, labor hours, machine hours, CPU time, and computer network connect fees
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User Fee (or Recharge Rate)
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=
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Total costs / User Fee Base
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The markup percentage is derived by dividing the aggregate total of actual fiscal year operating expenses, equipment depreciation, and prior year over/under recovery by actual cost of goods sold:
How to Calculate Storeroom Markups
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Total costs
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+
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Fiscal year operating expenses
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+
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Annual depreciation expense for all equipment assigned and used by the service activity
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+/-
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Prior year under/over recovery
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=
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Total costs
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Markup Percentage
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Total Costs excluding cost of goods sold [a]
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Cost of goods sold [b]
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=
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Markup percentage [a] /[b] x 100%
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Markup for storeroom merchandise
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+
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Unit cost of merchandise for resale
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x
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Markup percentage
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=
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Markup
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Selling price for storeroom merchandise
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+
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Unit cost of merchandise for resale
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+
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Markup
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=
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Selling Price
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The following chart shows accounting entries for recording storeroom inventory:
How to Record Storeroom Inventory
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Action
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Entry
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Account Number
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To record storeroom purchases as inventory
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Debit GL account code
Credit OL account code
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55000 - Inventories
187100 - Purchase of Goods for Resale
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To adjust Banner inventory to physical inventory on the Fact Sheet
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If physical inventory is greater than Banner Inventory:
Debit GL account code
Credit OL account code
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55000 - Inventories
187100 – Purchase of Goods for Resale
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If physical inventory is less than Banner inventory:
Debit OL account code
Credit GL account code
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187100 – Purchase of Goods for Resale
55000 - Inventories
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To adjust Banner inventory to reflect removal of obsolete inventory
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Debit OL account code
Credit GL account code
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187103 – Obsolete Inventory for Resale
55000 - Inventories
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