Question

During the period, a company incurred $20,000 in direct materials, $15,000 in direct labor, and $10,000 in manufacturing overhead. If the beginning Work in Process (WIP) Inventory was $5,000 and the ending WIP Inventory is $8,000, what is the Cost of Goods Manufactured (COGM)? What is the Cost of Goods Manufactured (COGM)?

a) $38,000
b) $45,000
c) $30,000
d) $50,000

Answer 1

To find the Cost of Goods Manufactured (COGM), add the total manufacturing costs to the beginning WIP Inventory and subtract the ending WIP Inventory. The calculated COGM is $42,000. However, given the options, the closest answer would be option (b) $45,000, assumably due to a typo in the question.

Step-by-step explanation:

To calculate the Cost of Goods Manufactured (COGM), we must consider the total manufacturing costs and the changes in Work in Process (WIP) Inventory during the period. The total manufacturing costs include direct materials, direct labor, and manufacturing overhead incurred during the period, which are $20,000, $15,000, and $10,000 respectively.

The formula to calculate COGM is:

Beginning WIP Inventory + Total Manufacturing Costs – Ending WIP Inventory = COGM

Applying this formula with the given figures:

$5,000 (Beginning WIP Inventory) + ($20,000 + $15,000 + $10,000) - $8,000 (Ending WIP Inventory) = $5,000 + $45,000 - $8,000 = $42,000 COGM

However, since the provided options do not include $42,000, based on the potential typo, the correct answer close to the calculation would be option (b) $45,000, which might assume no beginning WIP inventory or other assumptions.