What does manufacturing expense contain other than Raw materials / operating expense?


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Dear Binny, In the advanced Income statement course - there is mention of raw materials consumed and again materials used for manufacturing separtely. So what all would have probably gone into the manufacturing expense besides marktg as raw materials, staff costs, etc have already been taken into account separately. Wd it be lease rentals along along wityh marketing costs?

3 Answer(s)


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Pooja,
What items go into COGS and what go into Operating Expenses is highly subjective and varies from company to company. Even within the same company, these policies might change every year as they reclassify expenses when they have more clarity on its purpose and based on their accountants recommendations.

Yes, lease rentals is a fair item to go into COGS since the restaurant is a key component of delivering a Dominos service. Sometimes companies will include only part of the lease rentals in COGS and the remaining in Operating Expense.

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Thank you for your response. However was curious to know what was the difference between "raw materials consumed" and "materials used for manufacturing" as they are separate line items in the P& L of Dominos

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Pooja,
The "Raw Materials" are the cheese, vegetables and other ingredients that go into making the Pizza.

Dominos defines "Manufacturing Expenses" as expenses incurred towards rent,
cost of power and fuel consumed, cost of packaging materials, franchisee fee payable to Domino’s International, advertisement and publicity expenses. You can find this definition on Page 184 of this document - http://www.sebi.gov.in/dp/jubilantdraft.pdf