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?
A) Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory − Beginning work in process 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 + Beginning finished goods inventory − Ending finished goods inventory
D) Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory − Beginning finished goods inventory

Question

Quizplus · Accepted Answer

The cost of goods manufactured equation takes into account the total manufacturing costs incurred during a period and adjusts for the beginning and ending work in process inventory levels. Therefore, the correct equation is Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory − Ending work in process inventory. Option A is incorrect because it subtracts the beginning work in process inventory but adds the ending work in process inventory. Similarly, options C and D are incorrect as they use the beginning or ending finished goods inventory levels instead of the work in process inventory levels.