In July, Econo Company purchased materials costing $21,000 and incurred direct labour cost of $18,000. Overhead totalled $32,000 for the month. Information on inventories was as follows:
$\begin{array}{lrr}
& \text { July 1 } & \text { July 31 } \
\text { Materials } & \$ 6,200 & \$ 7,100 \
\text { Work in process } & \$ 700 & \$ 1,200 \
\text { Finished goods } & \$ 3,300 & \$ 2,700
\end{array}$
-Refer to the Figure.What was the cost of goods sold for July?
A)$69,600
B)$70,200
C)$71,100
D)$71,300

Question

In July, Econo Company purchased materials costing $21,000 and incurred direct labour cost of $18,000. Overhead totalled $32,000 for the month. Information on inventories was as follows:
 $\begin{array}{lrr} 
& \text { July 1 } & \text { July 31 } \
\text { Materials } & \$ 6,200 & \$ 7,100 \
\text { Work in process } & \$ 700 & \$ 1,200 \
\text { Finished goods } & \$ 3,300 & \$ 2,700
\end{array}$
-Refer to the Figure.What was the cost of goods sold for July?
A)$69,600
B)$70,200
C)$71,100
D)$71,300

Quizplus · Accepted Answer

The cost of goods sold is calculated as follows:  1. Calculate the cost of materials used:     Beginning Materials Inventory + Purchases - Ending Materials Inventory     = $6,200 + $21,000 - $7,100 = $20,100  2. Calculate the total manufacturing costs:     Materials Used + Direct Labour + Overhead     = $20,100 + $18,000 + $32,000 = $70,100  3. Calculate the cost of goods manufactured:     Beginning WIP Inventory + Total Manufacturing Costs - Ending WIP Inventory     = $700 + $70,100 - $1,200 = $69,600  4. Calculate the cost of goods sold:     Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory     = $3,300 + $69,600 - $2,700 = $70,200

In July, Econo Company Purchased Materials Costing $21,000 and Incurred