In Its First Year of Operations, a Company Has Sales

question 21

Multiple Choice

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.

---

Definitions:

Absorption Costing

An accounting method where all manufacturing costs, including both fixed and variable costs, are allocated to produced units.

Direct Labor Cost

The total cost of wages paid to workers directly involved in manufacturing a product or delivering a service.

Fixed Manufacturing Overhead

The total of all manufacturing costs that do not vary with the level of production, such as rent, salaries, and insurance.

Reconciliation

The process of ensuring that two sets of records or financial accounts are in agreement, often used in accounting to match transactions.