Which statement correctly reflects how Ending Work in Process affects Cost of Goods Manufactured? A) It is added to Total Manufacturing Costs. B) It is included in Total Manufactur... Which statement correctly reflects how Ending Work in Process affects Cost of Goods Manufactured? A) It is added to Total Manufacturing Costs. B) It is included in Total Manufacturing Costs. C) It is subtracted from the sum of Total Manufacturing Costs and Beginning Work in Process. D) It has no effect on Cost of Goods Manufactured.
Understand the Problem
The question is asking about the impact of Ending Work in Process on the Cost of Goods Manufactured, specifically which of the provided statements accurately describes this relationship.
Answer
It is subtracted from the sum of Total Manufacturing Costs and Beginning Work in Process.
The correct statement is C) It is subtracted from the sum of Total Manufacturing Costs and Beginning Work in Process.
Answer for screen readers
The correct statement is C) It is subtracted from the sum of Total Manufacturing Costs and Beginning Work in Process.
More Information
Ending Work in Process (WIP) is subtracted in the calculation for the Cost of Goods Manufactured (COGM) formula: COGM = Beginning WIP + Total Manufacturing Costs - Ending WIP.
Tips
A common mistake is thinking Ending WIP is added or has no effect. Always remember that it is subtracted in the COGM formula.
Sources
- Work in Process Inventory - What You Need to Know And More - brightpearl.com
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