In its first year of operations, a company has sales of $116,000, ending finished goods inventory of $11,800, variable manufacturing costs of $57,600, and fixed manufacturing costs of $28,000 for the year. Assuming the company uses direct costing, the cost of goods sold for the year is
A)$70,200.
B)$17,800.
C)$45,800.
D)$57,600.

Question

Quizplus · Accepted Answer

The cost of goods sold using direct costing can be calculated as total variable manufacturing costs + beginning finished goods inventory - ending finished goods inventory. 
Total variable manufacturing costs = $57,600 
Beginning finished goods inventory = $0 (assuming this is a new company with no carryover inventory from previous years) 
Ending finished goods inventory = $11,800 
So, cost of goods sold = $57,600 + $0 - $11,800 = $45,800. Therefore, the answer is C.

In Its First Year of Operations, a Company Has Sales