Question

Proper English and grammar MUST be used for the answer:

List the steps to compute Cost of Goods Sold?

Answer 1

Cost of goods sold (COGS) are the direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs.

When using the periodic method of inventory, Cost of Goods Sold is calculated using the following equation:

Beginning Inventory + Inventory Purchases – End Inventory = Cost of Goods Sold

This equation makes perfect sense when you look at it piece by piece.

The second way to calculate the cost of goods sold is to use the following costs: beginning inventory + the cost of goods purchased or manufactured = cost of goods available – ending inventory. Whencosts change during the accounting period, a cost flow will have to be assumed