During its first year of operations, a company that incurred $1,500 in production costs reported cost of goods sold of $890 and selling costs of $190. The company's ending finished goods inventory was $610.

Question

Quizplus · Accepted Answer

To calculate the cost of goods sold, we use the formula: Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory = Cost of Goods Sold. Since the company is in its first year of operations, there was no beginning finished goods inventory. Therefore, Cost of Goods Manufactured = $1,500. Thus, Cost of Goods Sold = 0 + $1,500 - $610 = $890, which matches the reported number. Additionally, selling costs are separate from production costs and do not affect the calculation of cost of goods sold.

During Its First Year of Operations, a Company That Incurred