Yesteryear Industries Inc.reported the following information about the production and sale of its only product during the first month of operations: The company sold one-half of the units it produced.Under absorption costing,what is the cost of goods sold?
A)$30,000
B)$42,000
C)$58,000
D)$78,000

Question

Yesteryear Industries Inc.reported the following information about the production and sale of its only product during the first month of operations:  The company sold one-half of the units it produced.Under absorption costing,what is the cost of goods sold?
A)$30,000 
B)$42,000 
C)$58,000 
D)$78,000

Quizplus · Accepted Answer

Under absorption costing, cost of goods sold includes all manufacturing costs (direct materials, direct labor, and manufacturing overhead) of the units sold.
Total units produced = 20,000
Units sold = 10,000
Cost per unit = ($360,000 ÷ 20,000) = $18
Cost of goods sold = 10,000 units × $18 per unit = $180,000
Therefore, the correct answer is C ($58,000 is not a possible option).