Objective 2.6
1) Which of the following formulas determine cost of goods sold in a merchandising entity? A) Beginning inventory + Purchases + Ending inventory = Cost of goods sold B) Beginning inventory + Purchases – Ending inventory = Costs of goods sold C) Beginning inventory – Purchases + Ending inventory = Cost of goods sold D) Beginning inventory – Ending inventory – Purchases = Cost of goods sold
2) Which of the following formulas determine cost of goods sold in a manufacturing entity? A) Beginning work-in-process inventory + Cost of goods manufactured – Ending work-in-process inventory = Cost of goods sold B) Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory = Cost of goods sold C) Cost of goods manufactured – Beginning finished goods inventory – Ending finished goods inventory = Cost of goods sold
D) Cost of goods manufactured + Beginning finished goods inventory – Ending finished goods inventory = Cost of goods sold
3) A company reported revenues of $375,000, cost of goods sold of $118,000, selling expenses of $11,000, and total operating costs of $70,000. Gross margin for the year is ________. A) $257,000 B) $246,000 C) $176,000 D) $252,000
Answer the following questions using the information below:
Leslie Manufacturing reported the following:
Revenue
$450,000
Beginning inventory of direct materials, January 1, 2015
20,000
Purchases of direct materials
156,000
Ending inventory of direct materials, December 31, 2015
18,000
Direct manufacturing labor
21,000
Indirect manufacturing costs
42,000
Beginning inventory of finished goods, January 1, 2015
40,000
Cost of goods manufactured
114,000
Ending inventory of finished goods, December 31, 2015
45,000
Operating costs
150,000
4) What is Leslie’s cost of goods sold? A) $103,000 B) $109,000 C) $112,000 D) $118,000
5) What is Leslie’s gross margin (or gross profit)? A) $103,000 B) $152,000 C) $341,000 D) $317,000
6) Inventoriable costs and period costs flow through the income statement at a merchandising company similar to the way costs flow at a manufacturing company.
7) Cost of goods sold refers to the products brought to completion, whether they were started before or during the current accounting period.