Question
The formula to compute cost of goods sold is
merchandise available for sale plus ending inventory
merchandise available for sale plus net purchases.
merchandise available for sale minus ending inventory
merchande available for sale plus beginning inventory
merchandise available for sale plus ending inventory
merchandise available for sale plus net purchases.
merchandise available for sale minus ending inventory
merchande available for sale plus beginning inventory
Ask by Higgins Martinez. in the United States
Mar 27,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The cost of goods sold is calculated by subtracting the ending inventory from the merchandise available for sale.
Solution
- The formula for cost of goods sold is based on the concept of finding the difference between what is available for sale and what remains at the end of a period.
- First, we determine the merchandise available for sale as:
- Then, we subtract the ending inventory from the merchandise available for sale to calculate the cost of goods sold:
- Therefore, the correct formula is:
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Simplify this solution The Deep Dive
To compute the cost of goods sold (COGS), you use the formula: merchandise available for sale minus ending inventory. This calculation helps businesses determine the total cost of inventory that has been sold during a specific period, giving insights into their profitability.
In real-world application, understanding COGS is vital for financial reporting and tax calculations. By accurately calculating COGS, businesses can assess their gross profit and make informed decisions on pricing, inventory management, and overall business strategy. This ensures a healthy financial outlook and aids in strategic planning.
