Benson Inc.'s accounting records reflect the following inventories: $$\begin{array} { l c c }
& \text { Dec. 31,2016 } & \text { Dec. 31, 2017 } \
\text { Raw materials inventory } & \$ 80,000 & \$ 64,000 \
\text { Work in process inventory } & 104,000 & 116,000 \
\text { Finished goods inventory } & 100,000 & 92,000
\end{array}$$ During 2017 Benson purchased $1450000 of raw materials incurred direct labor costs of $250000 and incurred manufacturing overhead totaling $160000. Assume Benson's cost of goods manufactured for 2017 amounted to $1660000. How much would it report as cost of goods sold for the year?

Question

Benson Inc.'s accounting records reflect the following inventories: $$\begin{array} { l c c } 
& \text { Dec. 31,2016 } & \text { Dec. 31, 2017 } \
\text { Raw materials inventory } & \$ 80,000 & \$ 64,000 \
\text { Work in process inventory } & 104,000 & 116,000 \
\text { Finished goods inventory } & 100,000 & 92,000
\end{array}$$ During 2017 Benson purchased $1450000 of raw materials incurred direct labor costs of $250000 and incurred manufacturing overhead totaling $160000. Assume Benson's cost of goods manufactured for 2017 amounted to $1660000. How much would it report as cost of goods sold for the year?

Quizplus · Accepted Answer

Cost of Goods Sold (COGS) is calculated as: Beginning Inventory + Purchases + Labor + Overhead - Ending Inventory. For Benson Inc., the calculation is as follows: Beginning Inventory (Raw Materials + Work in Process + Finished Goods) = $80,000 + $104,000 + $100,000 = $284,000. Purchases = $1,450,000, Labor = $250,000, Overhead = $160,000. Total Inputs = Purchases + Labor + Overhead = $1,450,000 + $250,000 + $160,000 = $1,860,000. Cost of Goods Manufactured = $1,660,000. Ending Inventory (Raw Materials + Work in Process + Finished Goods) = $64,000 + $116,000 + $92,000 = $272,000. COGS = Beginning Inventory + Total Inputs - Ending Inventory = $284,000 + $1,660,000 - $272,000 = $1,672,000. However, given the options and the provided data, the closest match and correct calculation method involves directly using the Cost of Goods Manufactured and adjusting for the change in finished goods inventory: COGS = Cost of Goods Manufactured + Beginning Finished Goods Inventory - Ending Finished Goods Inventory = $1,660,000 + $100,000 - $92,000 = $1,668,000. The closest option to this calculation is A) $1,668,000, acknowledging a slight discrepancy in the final step of calculation.

Benson Inc During 2017 Benson Purchased $1450000 of Raw Materials Incurred Direct