Question

Consider the following for Guardian Manufacturing Company: Change in finished goods inventory $ 315 increase Change in work-in-process inventory $ 145 increase Total manufacturing costs $ 630 What are the cost of goods manufactured and cost of goods sold? Cost of goods manufactured Cost of goods sold A. $ 470 $ 320 B. $ 485 $ 170 C. $ 505 $ 280 D. $ 485 $ 370

Answer 1

Answer:

B) $ 485 $ 170

Explanation

The cost of goods manufactured includes all the manufacturing costs in a given period adjusting for changes in work in process balances. The total manufacturing costs are $ 630 but this results in  an increase in work in process inventory by $ 145, so in other words, part of the total manufacturing costs have gone towards increasing the work in process balance.

So the cost of goods manufactured is $ 630 - $ 145 = $  485.

The cost of goods sold is the cost of goods manufactured above adjusted for changes in finished goods.

so the cost of goods sold is $ 485 - $ 315 ( change in finished goods inventory) = $ 170.