Increase in Work-in-Progress Reduces Both Costs Steps:

• Calculate cost of production (COGM) using formula: Opening WIP + manufacturing costs incurred – closing WIP.
• The $350 increase (from$850 to $1,200) enlarges the subtraction, decreasing COGM.
• Calculate cost of sales (COGS) using formula: Opening finished goods + COGM – closing finished goods.
• Lower COGM flows through to lower COGS, assuming finished goods inventory is unchanged. Why B is correct:
• Per standard cost accounting formulas, higher closing WIP reduces COGM by the increase amount ($350), and this reduction directly lowers COGS. Why the others are wrong:
• A: COGS decreases due to lower COGM, not increases.
• C: COGM decreases from higher closing WIP, not increases.
• D: Neither cost increases; both are reduced by the WIP buildup.

Final answer: B