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This is the total cost of manufacturing. Cost of goods manufactured is total manufacturing costs adjusted for the change in work-in-process inventory.
Cost of goods manufactured is total manufacturing costs adjusted for the change in work-in-process inventory. Total manufacturing costs are total prime costs (direct materials used + direct labor used) + manufacturing overhead applied. We are told that the direct labor was $300,000 but will need to calculate the direct materials used and the manufacturing overhead applied for January. The beginning direct materials inventory was $134,000. During the period, they purchased $189,000 of direct materials and also incurred $3,000 in transportation in costs. However, they also returned $1,000 of direct materials during the period. Adding these together we can calculate the total direct materials available during January as $325,000. Since there was an ending inventory of $124,000, they must have used $201,000 of direct materials during the period. Overhead is applied as 60% of direct labor, which totals $180,000 ($300,000 × 60%). Adding the prime costs (direct materials and direct labor) plus the overhead, we get $681,000 of total manufacturing costs. Work-in-process inventory increased during the period by $16,000. This means that $16,000 of the work performed during the period was in ending work-in-process inventory and not finished goods inventory, so this amount needs to be subtracted from the total manufacturing cost to calculate the cost of goods manufactured. The cost of goods manufactured is $681,000 ? $16,000, or $665,000. Another way to calculate the cost of goods manufactured is to use the beginning and ending WIP inventory balances instead of the amount of change. Beginning WIP inventory was $235,000. Cost of manufacturing was $681,000. Ending WIP Inventory was $251,000. Cost of goods manufactured is beginning WIP inventory of $235,000 plus cost of manufacturing of $681,000 minus ending WIP Inventory of $251,000, which is $665,000.
The question asks for cost of goods manufactured. This answer results from an incorrect calculation of cost of goods sold. Cost of goods manufactured is one component in the calculation of cost of goods sold. Cost of goods sold is beginning finished goods inventory + cost of goods manufactured ? ending finished goods inventory. This answer results from turning around beginning and ending finished goods inventory in the calculation of cost of goods sold. This is ending finished goods inventory + cost of goods manufactured ? beginning finished goods inventory. The question asks only for cost of goods manufactured.
This is the cost of goods sold. Cost of goods sold is beginning finished goods inventory + cost of goods manufactured ? ending finished goods inventory. The question asks only for the cost of goods manufactured.