Question

During its first year of operations, Brown Company incurred the following product costs:

Direct materials used in production $200,000;

Direct labor $175,000; and

Manufacturing overhead $145,500.

The Brown Company's ending Work in Process Inventory amounted to $35,000 at the end of the year. What is the company's cost of finished goods manufactured for the year?

a. $375,000

b. $200,000

c. $485,500

d. $520,500

2. Within the relevant range, fixed costs:

a. Remain steady when sales volume changes.

b. Rise as sales volume rises.

c. Fall as sales volume falls.

d. Rise as sales volume falls.

Answer 1

1.

Statement of Cost of Goods Sold Manufactured
Direct materials	200,000
Direct labor	175,000
Manufacturing overhead	145,500
Total Manufacturing Cost	$520,500
Ending work in process inventory	-35,000
Cost of Goods Manufactured	$485,500

The company's cost of finished goods manufactured for the year is $485,500

2. Within the relevant range fixed cost remains steady when sales volume changes.

correct option is a.

Within the relevant range, total fixed cost do not change. Per unit fixed cost increase with decrease in output and per unit fixed cost decrease with the increase in the number of units produced.

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