T-accounts for the inventory accounts of the Arturo Manufacturing Company are shown below. This data represents transactions for the year of 2012. Based on the data shown here, what was the amount of the cost of goods manufactured?

Question

T-accounts for the inventory accounts of the Arturo Manufacturing Company are shown below. This data represents transactions for the year of 2012.  Based on the data shown here, what was the amount of the cost of goods manufactured?

Quizplus · Accepted Answer

The cost of goods manufactured is the total cost of the goods that were completed during the year. To calculate this, we add the total manufacturing costs (direct materials, direct labor, and factory overhead) incurred during the year to the beginning inventory and subtract the ending inventory.

The beginning inventory for raw materials is given as $77,000, and the ending inventory for raw materials is given as $84,000. Therefore, the raw materials used during the year is $77,000 + purchases - $84,000. Purchases are given as $578,000, so the raw materials used during the year is $571,000.

The beginning inventory for work in process is given as $42,000, and the ending inventory for work in process is given as $33,000. Therefore, the cost of goods manufactured is equal to the sum of the raw materials used during the year, the direct labor incurred during the year ($555,000), and the factory overhead incurred during the year ($36,000) plus beginning work in process minus ending work in process. Using this formula, we get:

Cost of goods manufactured = $571,000 + $555,000 + $36,000 + $42,000 - $33,000 = $1,171,000

Therefore, the correct answer is D, $591,000.

T-Accounts for the Inventory Accounts of the Arturo Manufacturing Company