Which of the following items is NOT included in the calculation of Cost of Goods Manufactured under both the perpetual and periodic inventory systems?

• A. Direct materials used
• B. Factory overhead
• C. Cost of goods sold
• D. Direct labor

Answer: (C)

Verified step by step guidance

1. Understand the concept of Cost of Goods Manufactured (COGM): COGM represents the total cost incurred to manufacture products during a specific period. It includes direct materials used, direct labor, and factory overhead, but does not include costs related to selling or administrative expenses.
2. Review the components of COGM: The calculation includes direct materials used (raw materials consumed in production), direct labor (wages paid to workers directly involved in production), and factory overhead (indirect costs such as utilities, depreciation, and maintenance related to the production process).
3. Identify the item that is NOT part of COGM: Cost of Goods Sold (COGS) is excluded from the calculation of COGM. COGS represents the cost of inventory sold during a period and is calculated separately after determining the finished goods inventory and sales data.
4. Clarify the distinction between COGM and COGS: COGM focuses on the production costs incurred to manufacture goods, while COGS pertains to the cost of goods that have been sold. These are distinct concepts in financial accounting.
5. Conclude that Cost of Goods Sold is not included in the calculation of COGM under either the perpetual or periodic inventory systems, as it is a separate calculation related to sales rather than production.