During the month of June,Reardon Company incurs $17,000 of direct labour and $8,500 of manufacturing overhead,and purchases $15,000 of raw materials.Between the beginning and the end of the month,the raw-materials inventory increases by $2,000,the finished goods inventory increases by $1,500,and the work-in-process inventory decreases by $3,000.What is the cost of goods manufactured?
A) $38,500.
B) $40,500.
C) $41,500.
D) $43,500.

Question

Quizplus · Accepted Answer

The formula for calculating Cost of Goods Manufactured is as follows:
Cost of Goods Manufactured = Direct Materials + Direct Labor + Manufacturing Overhead + Beginning Work-in-Process Inventory - Ending Work-in-Process Inventory

Plugging in the given values:
Direct Materials = $15,000
Direct Labour = $17,000
Manufacturing Overhead = $8,500
Beginning WIP Inventory - Ending WIP Inventory = -$3,000
This indicates that the Ending WIP inventory is $3,000 more than the Beginning WIP inventory. Therefore, we need to subtract $3,000 from the sum of Direct Material, Direct Labor and Manufacturing Overhead. 
So, 
Cost of Goods Manufactured = $15,000 + $17,000 + $8,500 + $0 - $3,000
= $38,500.

Hence, the correct choice is C.

During the Month of June,Reardon Company Incurs $17,000 of Direct