Answer (D) is correct . COGS equals COGM adjusted for the change in finished goods inventory. COGM equals all manufacturing costs incurred during the period, plus BWIP, minus EWIP. Materials used equals $144,000 ($30,000 BI + $160,000 purchased – $2,000 discounts – $44,000 EI). Thus, manufacturing costs incurred during the period equal $494,000 ($144,000 materials used + $200,000 DL + $150,000 OH), and COGM equals $504,000 ($494,000 + $80,000 BWIP – $70,000 EWIP). Accordingly, COGS is $496,000 ($504,000 COGM + $16,000 BFG – $24,000 EFG).
Answer (A) is incorrect because This amount results from reversing the treatment of purchase discounts.
Answer (B) is incorrect because This amount is the COGM.
Answer (C) is incorrect because This amount results from assuming that no beginning or ending inventories of materials, WIP, or finished goods existed.
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Horatio’s cost of goods sold (COGS) for the year ended September 30, Year 2, is
