The total manufacturing cost for a business is $29,400. It is 70% of the cost of goods manufactured. What is the cost of goods manufactured?

Question

This is a question for managerial accounting. The book does not have any information about this question and it came out of nowhere for our online homework. From what I've gathered it's probably solvable from cross multiplication but I'm unsure of how to do it.

Answer 1

This problem is merely a "% of" problem (easy algebra).

 

What makes it interesting in Managerial Accounting is the terms that are used and how they relate:

    -- total manufacturing cost

    -- cost of goods manufactured

 

[Read the problem in reverse]   The problem asks you to find "the cost of goods manufactured." 

 

"IT" is 70% of the cost of goods manufactured.  In word (story) problems, the word "of" usually means multiply.  Percent may be expressed as 70% or 0.70 or 70/100 as needed in the problem.

 

"IT" is the total manufacturing cost for a business.  "Is" means "equals."     TMC = $29,400.

 

     TMC (that is, "IT") = (70%)*(Cost of goods manufactured)

             $29,400   = (70/100)*(Cost of goods manufactured)

            $ 42,000  =  (Cost of goods manufactured)             [multiply both sides by 100/70]