Question

Question 3: During its first year of operations, Connor Company paid $50,000 for direct materials and $36,000 in wages for production workers. Lease payments and utilities on the production facilities amounted to $14,000. General, selling, and administrative expenses were $16,000. The company produced 5,000 units and sold 4,000 units for $30.00 a unit. What is Connor's cost of goods sold for the year? Select one: O a. $70,000 O b. $85,000 O c. $75,000 O d. $80,000

Answer 1

Option (d) is correct

Cost of goods sold comprises all costs related to the production. It will exclude the costs of general, selling and administrative expenses. First we will calculate the cost of goods manufactured as per below:

Total cost of goods manufactured = Direct material + Direct labor + Lease payments and utilitues on production facilities

Total cost of goods manufactured = $50000 + $36000 + $14000 = $100000

Total units manufactured or produced = 5000

Per unit cost of goods manufactured = $100000 / 5000 = $20

Now,

Units sold = 4000

Cost of goods sold = 4000 * $20 = $80000