Understanding Manufacturing Accounts

What is the formula for calculating Cost of Goods Sold?

• COGS = Beginning Inventory + Ending Inventory

• COGS = Beginning Inventory + Purchases - Ending Inventory

• COGS = Beginning Inventory - Purchases + Ending Inventory

• COGS = Purchases - Ending Inventory

Define Direct Materials Used in manufacturing.

• Direct materials used are the raw materials that can be directly attributed to the production of finished goods.

• Direct materials are the finished goods ready for sale.

• Direct materials are the overhead costs incurred during manufacturing.

• Direct materials are the labor costs associated with production.

How do you calculate Direct Labor Costs?

• Direct Labor Costs = Sum of (Hourly Wage x Total Hours Worked) for all employees.

• Direct Labor Costs = Total Revenue - Fixed Costs.

• Direct Labor Costs = Total Expenses / Total Hours Worked.

• Direct Labor Costs = Average Salary x Number of Employees.

What is included in Manufacturing Overhead?

• Direct materials costs

• Administrative salaries

• Sales and marketing expenses

• Manufacturing overhead includes indirect costs like factory rent, utilities, depreciation, indirect labor, and indirect materials.

Explain how Gross Profit is calculated.

• Gross Profit = Total Revenue - Cost of Goods Sold (COGS)

• Gross Profit = Cost of Goods Sold - Total Revenue

• Gross Profit = Total Revenue - Operating Expenses

• Gross Profit = Total Revenue + Cost of Goods Sold (COGS)

What are the different Inventory Valuation Methods?

• Specific Identification

• Standard Costing

• Last In, First Out (LIFO)

• FIFO, LIFO, Weighted Average Cost

How does the FIFO method affect inventory valuation?

• FIFO results in lower cost of goods sold and higher inventory valuation during inflation.

• FIFO results in equal cost of goods sold and inventory valuation in all economic conditions.

• FIFO has no impact on inventory valuation regardless of inflation.

• FIFO leads to higher cost of goods sold and lower inventory valuation during inflation.

What is the impact of Direct Materials on the Cost of Goods Sold?

• Direct materials have no effect on the Cost of Goods Sold.

• Direct materials are unrelated to the Cost of Goods Sold.

• Direct materials increase the Cost of Goods Sold.

• Direct materials decrease the Cost of Goods Sold.

Describe the role of Direct Labor in manufacturing costs.

• Direct labor includes the cost of raw materials used in production.

• Direct labor is a key component of manufacturing costs, representing the wages and benefits of workers directly involved in production.

• Direct labor refers to the overhead costs associated with manufacturing.

• Direct labor is the total cost of machinery and equipment in the factory.

What is the difference between fixed and variable manufacturing overhead?

• Fixed manufacturing overhead varies with production levels, while variable remains constant.

• Variable manufacturing overhead is incurred only during peak production times.

• Fixed manufacturing overhead includes direct labor costs, while variable does not.

• Fixed manufacturing overhead is constant, while variable manufacturing overhead changes with production levels.