Question

An entity had the following opening and closing inventory balances during the current year: 1/1 12/31 Finished goods $ 90,000 $260,000 Raw materials 105,000 130,000 Work-in-progress 220,000 175,000 The following transactions and events occurred during the current year: $300,000 of raw materials were purchased, of which $20,000 were returned because of defects. $600,000 of direct labor costs were incurred. $750,000 of production overhead costs were incurred. The cost of goods sold for the current year ended December 31 would be A. $1,500,000 B. $1,480,000 C. $1,650,000 D. $1,610,000

Answer 1

B. $1,480,000

Step-by-step explanation:

The computation of the cost of the goods sold is shown below:

Direct material consumed:

beginning Inventory of RM $105,000

Add: Net Purchase ($300,000 - $20,000) $280,000

Total material available $385,000

Less: ending inventory -$130,000

Direct material consumed $255,000

Now

Cost of goods manufactured:

Beginning inventory of Wip $220,000

Current cost:

Direct material $255,000

Direct labor $600,000

Manufacturing OH $750,000

Total current cost $1,605,000

Total cost of WIP $1,825,000

Less: Ending inventory of Wip $175,000

Cost of goods manufactured $1,650,000

Cost of goods sold:

Beginning inventory of FG $90,000

Add: Cost of goods manufactured $1,650,000

Total cost of goods available for sale 1740000

Less: Ending inventory of FG -$260,000

Cost of goods sold $1,480,000