[barelystayingsane]

On page B2-34 (Becker 2013), Becker says that the cost of goods manufactured represents the sum of the budgets for 1) direct labor, 2) direct material used, and 3) factory overhead applied. But that doesn’t seem correct to me. The sum of those three amounts would equal total manufacturing cost for the year. You would then have to add that sum to beginning WIP inventory and subtract ending WIP inventory to reach cost of goods manufactured. The only instance where I could see where that sum equaled COGM is if there is no beginning and ending inventory. On the exam, how will you know whether or not to add beginning inventory and subtract ending inventory?

Thank you!

[SeattleAccountant]

@Barely, hi again 🙂

I'm going with the earlier chapter and proper explanation on page B1-42, Becker explains COGM as “manufacturing costs of the products COMPLETED THIS PERIOD. These costs consist of direct materials, direct labor, and manufacturing OH costs. These manufacturing costs INCURRED DURING the PERIOD and are increased or decreased by the net change in WIP (beg WIP minus ending WIP) to equal cost of goods manufactured.”

Example on page B2-34 does not indicate amounts in beg or ending WIP and thus may look misleading as if somehow COGM equals to total cost of goods manufactured.

Becker Class of Jan - Aug 2013: FARB DONE!!!!
CPA license pending 🙂

[barelystayingsane]

You're a lifesaver, SeattleAccountant! You're like Batman with the Bat-signal whenever I have a question.

[SeattleAccountant]

Well, it is a temporary situation, haha!

I'm studying same stuff as you are and every time I see questions posted by anyone including yourself on the sections that i'm working, I try to figure out if I know the answer = serves as a gauge to my own readiness or lack of for the exam.

Becker Class of Jan - Aug 2013: FARB DONE!!!!
CPA license pending 🙂

[Author]

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