Last year there was no change in either the raw materials or work in process beginning and ending inventories. However, finished goods, which had a beginning balance of P25, 000, increase by P15, 000. If the manufacturing cost incurred totaled P600, 000 during the year, the cosr of goods available for sale must have been:

INTRODUCTION TO COST ACCOUNTING

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	P610, 000
B	P625, 000
C	P585, 000
D	P600, 000

Explanation:

Detailed explanation-1: -Subtract the cost of goods sold from the total goods available for sale. This will give you the total value of finished goods at the end of the year.

Detailed explanation-2: -To calculate the WIP precisely, you would have to count each inventory item and determine the valuation accordingly manually. Fortunately, you can use the work-in-process formula to determine an accurate estimate. It is: Beginning WIP Inventory + Manufacturing Costs – COGM = Ending WIP Inventory.

Detailed explanation-3: -A cost of goods manufactured schedule shows beginning and ending inventories for: raw materials and work in process only. A manufacturer may report three inventories on its balance sheet: (1) raw materials, (2) work in process, and (3) finished goods.

Detailed explanation-4: -The first step to calculating beginning inventory is to figure out the cost of goods sold (COGS). Next, add the value of the most recent ending inventory and then subtract the money spent on new inventory purchases. The formula is (COGS + ending inventory) – purchases.

There is 1 question to complete.