I understand that we are supposed to add the beginning raw material inventory, added the raw materials purchased, then subtract both the indirect materials and ending raw material inventory ($43,000+$62,000-$24,000-$1,000=80,000). However, can anyone go into more detail why we do it this way? Thanks!

50) Given the following information, calculate Cost of Good Sold: Raw Materials inventory, 1/1/17 $43,000 Raw Materials inventory, 12/31/17 24,000 Raw Materials Purchases 62,000 Indirect Materials Used 1,000 Direct labor 156,000 Applied overhead 180,000 Work in process inventory, 1/1/17 53,000 Work in process inventory, 12/31/17 61,000 Finished goods inventory, 1/1/17 84,000 Finished goods inventory, 12/31/17 97,000 a. $395,000 b. $80,000 c. $408,000 d. $416,000