Final answer:
The correct method to determine total manufacturing costs includes adding (c) Manufacturing overhead applied to direct materials and direct labor, not deducting ending work in process from beginning work in process inventory. Cost calculations involve assessing both fixed costs and variable costs, and their effects on production costs in the short run.
Step-by-step explanation:
The process of determining total manufacturing costs on the cost of goods manufactured schedule involves several steps. Option c) Manufacturing overhead applied is the correct choice because it is added to direct materials and direct labor to find the total manufacturing costs. Beginning work in process inventory does not necessarily have to be zero; it should reflect the value of the inventory carried over from the previous period. The ending work in process inventory is subtracted from the total of direct materials, direct labor, and manufacturing overhead applied to determine the cost of goods manufactured.
In a short-run perspective, total costs are divided into fixed costs, which are incurred before any output is produced and are considered sunk costs, and variable costs, which are incurred during production. Variable costs are subject to diminishing marginal returns, which results in the marginal cost of producing higher output levels to rise. In determining the cost structure for a firm, total cost, average variable cost, average total cost, and marginal cost must be calculated following the formulas provided in the relevant production and cost chapters.