Question

Which of the following is true of cost of goods sold? a. It is an expense that appears on the income statement. b. It includes all selling and administrative expenses. c. It represents the total conversion cost of the goods manufactured. d. The balance in this account is transferred to finished goods inventory.

Answer 1

Question 1

Correct answer----------(a) It is an expense that appears on the income statement.

Cost of goods sold is the amount of expense made on producing the product that are sold. Cost of goods sold include direct material cost , direct labor cost and variable as as well as fixed manufacturing overhead costs.

Question 2

Correct answer----------(b) As current asset on balance sheet.

All inventories are part of current asset. The inventory sub categories are Raw material, Work in process and Finished goods.

Question 3

Correct answer----------(b) $55,000

Working

Schedule of cost of goods sold
Beginning Finished Goods Inventory		$         26,000.00
Add: Cost of goods manufactured		$         60,000.00
Goods Available for sale		$         86,000.00
Less :Ending Finished goods Inventory		$         31,000.00
Cost of Goods Sold		$         55,000.00

Question 4

Correct answer----------(c ) $279,000

Working

Sales revenue	$   450,000.00
Less: Cost of goods sold	$   171,000.00
Gross margin	$   279,000.00