Answer:
B. $ 227,000
Explanation:
The cost of goods manufactured is calculated by the following equation:
Opening Work in Process + Direct Material + Direct Labour + Manufacturing Overhead - Closing Work in Process
Direct Materials $ 35.000
Direct Labour $ 73,000
Manufacturing OH $ 112,500
Total Manufacturing Costs incurred $ 220.500
Add: Opening work in process $ 28,000
Less: Closing work in process <u>$ ( 21,500)</u>
Cost of Goods Manufactured $ 227,000
Answer:
when costs are recognized as expenses on the income statement.
Explanation:
The expense recognition principle is an accounting principle which is typically used on accrual basis accounts and it states that expenses incurred by an individual or business entity should be recognized and matched in the same period with respect to the revenues they are related to.
The expense recognition principle indicates when costs are recognized as expenses on the income statement.
For instance, company XYZ purchases a property worth $90,000 in June, it was then sold in July for $250,000. Based on the expense recognition principle, the $90,000 cost shouldn't be recognized by company XYZ as an expense until July, when the related revenue would be recognized also. Else, if recognized, its expenses would be overstated by $90,000 in June, and consequently understated to the tune of $250,000 in July.
Additionally, the expense recognition principle helps business owners to calculate their taxes and profits or losses properly.
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