Question

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations?

Multiple Choice
a. Cost of goods manufactured = Total manufacturing costs + Beginning finished goods inventory – Ending finished goods inventory
b. Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory
c. Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory – Beginning work in process inventory
d. Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory – Beginning finished goods inventory

Answer 1

The cost of goods manufactured is calculated by adding the total manufacturing costs to the beginning work in process inventory and subtracting the ending work in process inventory. The correct option is b. Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory

Step-by-step explanation:

The cost of goods manufactured (COGM) is computed using the following equation: Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory.

This calculation helps in determining the total cost of goods that are completely manufactured over a period. The beginning work in process inventory represents the cost of unfinished goods at the start of the period, and the ending work in process inventory represents the cost of those unfinished goods at the end of the period.

By adding the total manufacturing costs to the beginning work in process and subtracting the ending work in process, we arrive at the COGM, which is a crucial component in understanding a company's production efficiency and overall costs. The correct option is b. Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory