The Formula to Compute Cost of Goods Manufactured Is

question 87

Multiple Choice

The formula to compute cost of goods manufactured is

• A)beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process Inventory.
• B)beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred minus ending Work in Process Inventory.
• C)direct material used plus direct labor plus overhead incurred.
• D)direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

Calculate the cost of goods manufactured using given job-order costing data.

Understand the role of direct labor hours in the allocation of manufacturing overhead.

Determine the cost of goods sold upon adjustment for underapplied or overapplied manufacturing overhead.

Analyze the flow of materials, labor, and overhead costs through Work in Process inventory to Finished Goods.

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Definitions:

Economies Of Scale

The cost advantages that enterprises obtain due to their scale of operation, typically resulting in cost per unit of output decreasing with increasing scale.

Diminishing Returns

A principle stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

Production Function

The relationship between the quantity of inputs a firm uses and the quantity of output it produces.

Inputs

The resources, such as labor, materials, and capital, that are used in the production process to produce goods or services.