Question

At the beginning of the year, Albertson Incorporated reports inventory of $7,700. During the year, the company purchases additional inventory for $22,700. At the end of the year, the cost of inventory remaining is $9,700. Calculate cost of goods sold for the year.

Answer 1

Cost of goods sold = Beginning inventory + Purchases - Ending inventory .

COGS = Cost of goods sold

COGS = 7700 + 22700 - 9700 = 20700

The total sum that your company spent on expenses directly associated with the selling of goods is known as the cost of goods sold.

The cost of products sold may take into account both the labor and materials used to create a product. Your COGS may also include sales expenses, such as commissions, that are unique to that product. Direct costs is the accounting term for this.

A cost that is not entirely committed to a particular item is one that is common to your company, such as rent, the purchase of a new machine, or general marketing expenses. These extra expenses are classified as overhead rather than as the cost of the items supplied.

For business owners and managers, tracking cost of products sold is crucial. That is the lowest price at which you can sell a good and still make a profit. Any surplus margin is used to pay for costs and eventually turn a profit. You cannot determine if you are profitable or not unless you are aware of your COGS and break-even point.

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