The beginning and ending finished goods inventories of the Prize Ring manufacturing company were $92,000 and $85,750 respectively. If cost of goods sold equaled $76,200, what is the amount of cost of goods manufactured for this period?
A $6,250
B $69.950
C $82,450
D $101,550
E $253,950
The correct answer and explanation is :
To calculate the cost of goods manufactured (COGM) for Prize Ring Manufacturing, we can use the following relationship in manufacturing accounting: COGM=COGS+Ending Finished Goods Inventory−Beginning Finished Goods Inventory\text{COGM} = \text{COGS} + \text{Ending Finished Goods Inventory} – \text{Beginning Finished Goods Inventory}
Where:
- COGS (Cost of Goods Sold) represents the total cost of the goods sold during the period.
- Ending Finished Goods Inventory is the value of the finished goods at the end of the period.
- Beginning Finished Goods Inventory is the value of the finished goods at the start of the period.
Given:
- Beginning Finished Goods Inventory = $92,000
- Ending Finished Goods Inventory = $85,750
- Cost of Goods Sold (COGS) = $76,200
Step-by-Step Calculation:
- COGM Formula: COGM=COGS+Ending Finished Goods Inventory−Beginning Finished Goods Inventory\text{COGM} = \text{COGS} + \text{Ending Finished Goods Inventory} – \text{Beginning Finished Goods Inventory}
- Substitute the given values: COGM=76,200+85,750−92,000\text{COGM} = 76,200 + 85,750 – 92,000
- Simplify the calculation: COGM=76,200+(−6,250)\text{COGM} = 76,200 + (-6,250) COGM=69,950\text{COGM} = 69,950
Thus, the Cost of Goods Manufactured for the period is $69,950.
Explanation:
The cost of goods manufactured represents the total cost of goods that were completed during the period. It accounts for the beginning inventory of finished goods, the cost of goods sold, and the ending inventory. By using this formula, we subtract the difference between the beginning and ending finished goods inventories from the cost of goods sold to determine how much was actually manufactured. The result, $69,950, reflects the manufacturing cost for the period.
Correct Answer:
B $69,950