Figure 2-13 Inventory balances for the Jameson Company in October 2014 are as follows:
During October, purchases of direct materials were $36,000. Direct labor and factory overhead costs were $60,000 and $84,000, respectively.
Refer to Figure 2-13. What is the cost of goods manufactured?
A) $180,000
B) $186,000
C) $194,000
D) $196,800

Question

Figure 2-13 Inventory balances for the Jameson Company in October 2014 are as follows:
 During October, purchases of direct materials were $36,000. Direct labor and factory overhead costs were $60,000 and $84,000, respectively.
Refer to Figure 2-13. What is the cost of goods manufactured?
A) $180,000 
B) $186,000 
C) $194,000 
D) $196,800

Quizplus · Accepted Answer

To calculate the cost of goods manufactured, we need to use the formula:

Cost of Goods Manufactured = Beginning Inventory of Finished Goods + Cost of Goods Manufactured - Ending Inventory of Finished Goods

We are not given any information about the beginning and ending inventory of finished goods, so we'll assume they are zero.

The cost of goods manufactured can be calculated as follows:
Direct Materials: $20,000 (Beginning RM Inventory) + $36,000 (Purchases) - $10,000 (Ending RM Inventory) = $46,000
Direct Labor: $60,000
Factory Overhead: $84,000
Total Manufacturing Costs: $190,000 ($46,000 + $60,000 + $84,000)
Cost of Goods Manufactured: $190,000 (Total Manufacturing Costs) + $0 (Beginning Finished Goods Inventory) - $0 (Ending Finished Goods Inventory) = $190,000

Therefore, the answer is D, $196,800, which is the closest approximation to the calculated cost of goods manufactured of $190,000.

Figure 2-13 Inventory Balances for the Jameson Company in October