The following information was extracted from the accounting...

The following information was extracted from the accounting records of Roosevelt Manufacturing Company: $$\begin{array}{lr} \text { Direct materials purchased } & 80,000 \\ \text { Direct materials used } & 76,000 \\ \text { Direct manufacturing labor costs } & 10,000 \\ \text { Indirect manufacturing labor costs } & 12,000 \\ \text { Sales salaries } & 14,000 \\ \text { 0ther plant expenses } & 22,000 \\ \text { Selling and administrative expenses } & 20,000 \end{array}$$ What was the cost of goods manufactured? 1. $\$ 124,000$ 2. $\$ 120,000$ 3. $\$ 154,000$ 4. $\$ 170,000$

The following information was extracted from the accounting records of Roosevelt Manufacturing Company:
$$\begin{array}{lr}
\text { Direct materials purchased } & 80,000 \\
\text { Direct materials used } & 76,000 \\
\text { Direct manufacturing labor costs } & 10,000 \\
\text { Indirect manufacturing labor costs } & 12,000 \\
\text { Sales salaries } & 14,000 \\
\text { 0ther plant expenses } & 22,000 \\
\text { Selling and administrative expenses } & 20,000
\end{array}$$
What was the cost of goods manufactured?
1. $\$ 124,000$
2. $\$ 120,000$
3. $\$ 154,000$
4. $\$ 170,000$

Key Concepts

Product Costs vs. Period Costs

Product costs are those costs that are directly involved in the production of goods, such as direct materials, direct labor, and manufacturing overhead, and are inventoried until the goods are sold. In contrast, period costs, like selling and administrative expenses, are expensed in the period incurred and not included in the cost of goods manufactured.

Direct Labor

Direct labor includes wages and related benefits for workers who are directly involved in the production process. This cost is directly attributed to the manufacturing of goods and is a primary component of the total product cost.

Manufacturing Overhead

Manufacturing overhead encompasses all manufacturing costs that are not direct materials or direct labor. This includes costs such as indirect labor, indirect materials, maintenance, and other factory-related expenses, which are allocated to products based on predetermined rates.

Cost of Goods Manufactured

This represents the total production cost incurred by a company over a period to manufacture goods that were completed. It includes the sum of direct materials used, direct labor, and manufacturing overhead incurred on the production floor. Understanding this concept is key to assessing production efficiency and pricing strategies.

Direct Materials

Direct materials are the raw inputs that become an integral part of the final product. They can be traced directly to each unit of production and are recorded as a part of the cost of goods manufactured.

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