The following information is available for the first month of operations for Bluemoon, Inc.: $\begin{array}{|l|r|}
\hline \text { Sales } & \$ 850,000 \
\hline \text { Gross profit } & 330,000 \
\hline \text { Indirect labor } & 35,000 \
\hline \text { Indirect materials } & 14,000 \
\hline \text { Other factory overhead } & 9,000 \
\hline \text { Materials purchased } & 360,000 \
\hline \text { Total manufacturing costs } & 670,000 \
\hline \text { Materials inventory, end of period } & 20,000 \
\hline
\end{array}$ ? Based on the information provided for Bluemoon, Inc., calculate the cost of goods sold.
A) $670,000
B) $418,000
C) $520,000
D) $650,000

Question

Quizplus · Accepted Answer

Cost of Goods Sold (COGS) is calculated as: Total Manufacturing Costs + Opening Inventory of Materials - Ending Inventory of Materials + Purchases of Materials. Given Total Manufacturing Costs = $670,000, no Opening Inventory is mentioned, Ending Inventory of Materials = $20,000, and Purchases of Materials = $360,000. Thus, COGS = $670,000 + $0 - $20,000 + $360,000 = $1,010,000. However, this calculation seems incorrect based on the options provided, indicating a misunderstanding in the calculation process. The correct approach to find COGS is to start with Sales ($850,000), subtract Gross Profit ($330,000) to get COGS, which equals $520,000. This is because COGS = Sales - Gross Profit.

The Following Information Is Available for the First Month of Operations