How is the cost of goods sold (COGS) for a manufacturer computed under a periodic inventory system?

• A. Beginning Raw Materials Inventory + Purchases - Ending Raw Materials Inventory
• B. Beginning Work in Process Inventory + Direct Labor - Ending Work in Process Inventory
• C. Net Sales - Gross Profit
• D. Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the periodic inventory system. Under this system, inventory levels are updated at the end of the accounting period, and the cost of goods sold (COGS) is calculated based on the changes in inventory and production costs during the period.
2. Step 2: Identify the formula for calculating COGS for a manufacturer under a periodic inventory system. The correct formula is: COGS = Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory.
3. Step 3: Break down the components of the formula: (a) Beginning Finished Goods Inventory refers to the value of finished goods inventory at the start of the period. (b) Cost of Goods Manufactured includes all costs incurred to produce goods during the period, such as raw materials, direct labor, and manufacturing overhead. (c) Ending Finished Goods Inventory refers to the value of finished goods inventory at the end of the period.
4. Step 4: Gather the necessary data. To compute COGS, you need the values for Beginning Finished Goods Inventory, Cost of Goods Manufactured, and Ending Finished Goods Inventory. These values are typically found in the company's financial records or inventory reports.
5. Step 5: Substitute the values into the formula and perform the calculation. Use the formula: COGS = Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory. Ensure all values are accurate and properly aligned with the accounting period being analyzed.