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Describe the differences between merchandising and manufacturing  companies  with  regards  to  inventory the  calculation of  cost of goods sold. ?

Describe the differences between merchandising and manufacturing  companies  with  regards  to  inventory the  calculation of  cost of goods sold. ?

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Answer #1

Solution:

Manufacturing companies are having 3 types of invenotry (Raw materials, Work In process and finished goods) in their books , however merchandise company is having only one type of inventory in their books i.e. Merchandise inventory.

In manufacturing company cost of goods sold is calculated by = Beginning finished inventory + Cost of goods manufactured - Ending finished goods inventory

On the other hand, in merchandise company cost of goods sold is calculated by = Beginning inventory + Purchases - Ending inventory

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