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7 July, 09:41

LO 4.3Is the cost of goods manufactured the same as the cost of goods sold?

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  1. 7 July, 13:36
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    No

    Explanation:

    The computation of the cost of goods manufactured would be

    = Direct material cost + Direct labor cost + Manufacturing Overhead cost

    where,

    Manufacturing Overhead would be

    = Factory overhead + Beginning work-in-process - Ending work-in-process

    The above equation shows a cost allocated to direct material, direct labor and the manufacturing overhead

    And, the cost of goods sold would be

    = Beginning balance of inventory + cost of goods manufactured - ending balance of inventory

    By this above equation, we get to know that the cost of goods manufactured is a sub part of the cost of goods sold

    The other formula of cost of goods sold

    = Beginning balance of inventory + purchase made during the year - ending balance of inventory
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