Free Solved In a manufacturing company, costs of goods sold is calculated as which of the following?


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It is asked in question that In a manufacturing company, costs of goods sold is calculated as which of the following?

Step 1 of 2

In the problem, it has to choose how to calculate cost of goods sold in manufacturing company.

Cost of goods sold is the total amount of expenses that a business can reasonably incur in order to sell goods and services. The expense of goods sold, also known as the cost of goods manufactured, is incurred during the manufacturing process.

The amount of production costs that the company will incur when producing the goods is determined by the COGS calculations. overhead, labor, and raw material costs are included in the COGS.

Explanation:

in order to choose the correct option to calculate the cost of goods sold in manufacturing company, it was needed to know meaning of cost of goods sold. so the entire expense that a business lawfully incurs in order to sell goods and services is known as the cost of goods sold. The cost of goods manufactured is another term for the expense of goods sold during the manufacturing process.

 

Step 2 of 2

The fundamental accounting equation is the source of the COGS calculation formula:

Cost of goods sold is equal to:

Beginning Inventory+Purchases−Ending Inventory.

When a manufacturing company is involved, the components are modified to align with the manufacturing process:

1) Beginning Inventory: Indicates the amount of completed goods from the prior time frame.

2) Purchases: These match the current period’s costs for goods manufactured.

3) Ending Inventory: Indicates how much is worth of completed goods that are left at the end of the current period.

This equation is changed for a manufacturing company so that the production process is the main emphasis.

COGS=Costs of goods manufactured for the period−Ending finished goods inventory

1) Costs of goods manufactured for the period: This is the total amount of money the business spent on producing the goods over a given time frame. Direct labor, direct materials, and manufacturing overhead are all included.

2) Ending finished goods inventory: This is the total value of finished goods at the conclusion of the accounting period that have not been sold.

Explanation:

This formula is designed to calculate the cost of goods that have been sold by accounting for the costs incurred in manufacturing minus the value of the goods that remain in inventory at the end of the period.

 

Final solution

The correct formula for calculating Costs of Goods Sold (COGS) in a manufacturing company is:

COGS=Costs of goods manufactured for the period−Ending finished goods inventory

Therefore the option A is correct.

 

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