Cost of Goods Manufactured
Easy Practice Test
Introduction to Accounting
Easy Practice Test
Click the “Check Your Answer” box below each question to reveal the correct answer and explanation.
1. Which of the following is the calculation for cost of goods manufactured?
a. Beginning finished goods plus cost of goods sold less ending finished goods
b. Ending finished goods plus cost of goods sold less ending work in process
c. Beginning work in process plus product costs less ending work in process
d. Beginning finished goods plus product costs less ending work in process
Answer
C. Cost of goods manufactured is all product costs (direct material, direct labor, and manufacturing overhead) plus beginning work in process less ending work in process. (c.) is just another way to say this.
2. Which of the following inventory accounts is not used when calculating cost of goods manufactured?
a. raw materials
b. work in process
c. finished goods
d. all of the above are included
Answer
C. Finished goods is not included in the calculation. The calculation is used for the purpose of computing the cost of finished goods during the period.
3. Which of the following is included when calculating cost of goods manufactured?
a. finished goods
b. selling expenses
c. administrative expenses
d. beginning work in process
Answer
D. Beginning work in process includes the costs of the products that were not complete at the end of last period and were finished in the current period. The cost of goods manufactured is the cost of finished goods completed during the period so it is included. Selling and administrative are not product costs. Only product costs are included in the cost of goods manufactured.
4. The three major components of cost of goods manufactured are
a. direct materials purchased, direct labor, manufacturing overhead
b. direct materials used, work in process, finished goods
c. direct materials used, direct labor, finished goods
d. direct materials used, direct labor, manufacturing overhead
Answer
D. Work in process consists of all three product costs. Finished goods is not included. Materials used is what is important for cost of goods manufactured, not materials purchased.
5. A manufacturing company incurred $50,000, $60,000 and $75,000 respectively for direct materials used, direct labor, and manufacturing overhead. Cost of goods manufactured is $195,000 and beginning work in process is $10,000. What is ending work in process?
a. $0
b. $20,000
c. ($10,000)
d. 160,000
Answer
A. DM + DL + OH + Beg WIP – Ending WIP = Cost of goods manufactured. 50,000 + 60,000 + 75,000 + 10,000 – ? = 195,000 Ending WIP = 0 Work in process will never be negative.
6. A manufacturing company incurred the following costs:
1) $15,000 for insurance and property tax on the manufacturing building
2) $39,000 for salary to the quality inspectors at the manufacturing plant
3) $10,000 for shipping to the customer
4) $32,000 for rent on corporate headquarters building
What is the total cost of manufacturing overhead that will be included in the cost of goods manufactured?
a. $54,000
b. $64,000
c. $96,000
d. $86,000
Answer
A. Costs incurred at the manufacturing plant other than direct material and direct labor are part of manufacturing overhead, 1) and 2). Shipping is a selling cost and anything at the corporate headquarters is an administrative cost which are not product costs and therefore not part of cost of goods manufactured.
7. Cost of goods manufactured means the same thing as
a. inventory costs
b. product costs of completed goods
c. manufacturing overhead costs
d. period costs
Answer
B. Product costs are DM, DL, and manufacturing O/H. Cost of goods manufactured is the cost of completed goods. Manufacturing overhead is just one component of CGM. Inventory costs also include raw materials that have not been used and are not part of CGM and ending WIP which is not part of CGM. Period costs are expensed as incurred and are not part of CGM.
8. The cost of goods that is moved from work in process to finished goods is also called
a. cost of goods sold
b. inventory costs
c. cost of goods manufactured
d. ending work in process
Answer
C. This is the definition of cost of goods manufactured. It includes all product costs that were incurred to make complete finished products.
9. A manufacturing company had cost of goods manufactured of $200,000.
Inventory was as follows:
Ending Beginning
Raw Materials $100,000 $125,000
Finished Goods $ 75,000 $ 85,000
Cost of goods sold is:
a. $190,000
b. $225,000
c. $210,000
d. $175,000
Answer
C. Beginning FG + CGM – Ending FG = CGS. (85,000 + 200,000 – 75,000)
10. Cost of goods manufactured is
a. expensed in the period it is incurred
b. expensed in the period it is sold to the customer
c. always reported as inventory on the balance sheet
d. all the costs of a manufacturing company
Answer
B. Cost of goods manufactured is the product costs of making the product. It is expensed as cost of goods sold when it is sold to the customer and is inventory on the balance sheet only until it is sold to the customer. Manufacturing companies have selling and administrative expenses that are not part of cost of goods manufactured (d.)
11. Sims Manufacturing Company had the following data in their general ledger. Use this information to calculate cost of goods manufactured and cost of goods sold.
| Sales | 880,000 |
| WIP – beginning | 6,000 |
| Utilities at the manufacturing facility | 37,000 |
| Purchase of raw materials | 96,000 |
| Warehouse workers | 46,000 |
| Direct labor – assembly | 173,000 |
| Insurance on manufacturing facility | 18,000 |
| FG – ending | 62,000 |
| Executive salaries | 130,000 |
| Manufacturing plant management | 86,000 |
| Selling Expenses | 102,000 |
| Raw materials, beginning | 75,000 |
| Machine operators – production line | 74,000 |
| Raw materials, ending | 61,000 |
| WIP, ending | 8,000 |
| General business insurance | 16,000 |
| FG – beginning | 72,000 |
Answer
| Beginning Raw Materials Inventory | 75,000 |
| + Purchases of Raw Materials | 96,000 |
| – Ending Raw Materials Inventory | (61,000) |
| Materials Used in Production | 110,000 |
| Machine operators – production line | 74,000 |
| Direct labor – assembly | 173,000 |
| Total direct labor | 247,000 |
| Utilities at the manufacturing facility | 37,000 |
| Insurance on manufacturing facility | 18,000 |
| Manufacturing plant anagement | 86,000 |
| Total manufacturing overhead | 141,000 |
| + Beginning WIP | 6,000 |
| – Ending WIP | (8,000) |
| Cost of Goods Manufactured | 496,000 |
| Beginning finished goods | 72,000 |
| + Cost of goods manufactured | 496,000 |
| – Ending finished goods | (62,000) |
| = Cost of goods sold | 506,000 |
Warehouse workers is a period expense. General business insurance does not say “manufacturing plant” so it is a corporate administrative expense.
- XY Manufacturing Company had the following information in their accounting recordsUse this information to calculate cost of goods manufactured and cost of goods sold.
| Sales | 620,000 |
| Purchase of raw materials | 104,000 |
| Indirect labor | 52,000 |
| Direct labor – assembly | 122,000 |
| Insurance on manufacturing facility | 14,000 |
| Executive salaries | 125,000 |
| Selling Expenses | 44,000 |
| Utilities at the manufacturing facility | 29,000 |
| Inventory: | Ending | Beginning |
| Raw materials | 59,000 | 61,000 |
| Finished Goods | 93,000 | 84,000 |
| Work in process | 2,500 | 4,000 |
Answer
| Beginning Raw Materials Inventory | 61,000 |
| + Purchases of Raw Materials | 104,000 |
| – Ending Raw Materials Inventory | (59,000) |
| Materials Used in Production | 106,000 |
| Direct labor – assembly | 122,000 |
| Indirect labor | 52,000 |
| Insurance on manufacturing facility | 14,000 |
| Utilities at the manufacturing facility | 29,000 |
| Total manufacturing overhead | 95,000 |
| + Beginning WIP | 4,000 |
| – Ending WIP | (2,500) |
| Cost of Goods Manufactured | 324,500 |
| Beginning finished goods | 84,000 |
| + Cost of goods manufactured | 324,500 |
| – Ending finished goods | (93,000 |
| = Cost of goods sold | 315,500 |
13. A company had cost of goods available for sale of $1,470. Total manufacturing costs added this period were $1,200. Direct materials used were $400. Manufacturing overhead incurred was $350. Inventory information was:
Beginning Ending
Direct Materials $200 $180
Work in process $ 60 $ 40
Finished Goods $250 $275
Determine the following:
a. direct materials purchased
b. direct labor costs incurred
c. cost of inventory completed
d. cost of goods sold
Answer
1st – set up the format and plug in the numbers that you are given and solve for the other required amounts.
Beginning Raw Materials Inventory 200 + Purchases of Raw Materials ? 380 solved - Ending Raw Materials Inventory (180) = Materials Used in Production 400 Direct labor – assembly ? 450 solved Total manufacturing overhead 350 Total manufacturing cost added this period 1200 + Beginning WIP 60 - Ending WIP (40) Cost of Goods Manufactured ? 1220 solved Beginning finished goods 250 + Cost of goods manufactured ? 1220 above = Goods available for sale 1470 - Ending finished goods (275) = Cost of goods sold ? 1195 solved 2nd – Solve for purchases of raw materials 380 a. 3rd – Solve for direct labor (1200 – 350 – 400) 450 b. 4th - Solve for cost of goods manufactured ( 1200 + 60 – 40) 1220 c. This is also called cost of inventory completed. 5th – Solve for cost of goods sold – do the math 1195 d.