Question

The COGS reflected on the income statement is the same COGS we use in the development of a MCS. True False

Answer 1

Answer:

False

Explanation:

In marginal costing systems (MCS), the cost of goods sold (COGS) is made up of only variable costs.  This helps in determining the contribution margin, which is the difference between sales revenue and variable costs of production.

However, the cost of goods sold reflected on the income statement is not only the variable costs.  They include all the products' costs based on absorption costing, which is used in income statement preparation under the financial accounting system.  Marginal costing system is simply a cost accounting technique for internal or managerial usage.