Cog Case Study
XACC/PRINCIPAL OF
ACOUNTING 1
11/8/14
Shirley Ayala
Prof: Watts
Content and Development
7th Week
1. Analyze the element s in cost of goods sold calculation (COGS)
Cost of goods sold sometimes referred to as cost of sales COGS refers to the cost of products that is man-made, sold, or purchased and resold by the business. The cost of making the product is an expense to the business and reduces the profit that the company can make when selling the products. The COGS is calculation once a year by showing charges from the start to the end of the company fiscal (financial) year. In calculation the COGS you need to include cost of producing the product, wholesale price of good resold and what the direct manual labor cost the company makes the product. The other costs to be calculation is cost of containers, freight, rent, utilities, shipping and overhead. …show more content…
The sales of products need to be kept down to increase the profit. Inventory also determined the COGS by it changes of the product that was sold at the beginning of year and the inventory at the end of the previous year is calculation. The cost of goods purchased and made during the year is added up and the inventory at the end of the year is subtracted. This calculation is done so the company will know how much the inventory cost and how much was sold by the company during the year. The inventory is reported at the cost to make or buy the product, it is not the cost to sell it. If sells items cost change during the year, the company much figure out a transaction to deal with those cost changes in a way suitable to the IRS. It would have to figure this change into their COGS equation. The IRS has quite a few standard ways to account for changes in cost through the year without having to track each product price
ACOUNTING 1
11/8/14
Shirley Ayala
Prof: Watts
Content and Development
7th Week
1. Analyze the element s in cost of goods sold calculation (COGS)
Cost of goods sold sometimes referred to as cost of sales COGS refers to the cost of products that is man-made, sold, or purchased and resold by the business. The cost of making the product is an expense to the business and reduces the profit that the company can make when selling the products. The COGS is calculation once a year by showing charges from the start to the end of the company fiscal (financial) year. In calculation the COGS you need to include cost of producing the product, wholesale price of good resold and what the direct manual labor cost the company makes the product. The other costs to be calculation is cost of containers, freight, rent, utilities, shipping and overhead. …show more content…
The sales of products need to be kept down to increase the profit. Inventory also determined the COGS by it changes of the product that was sold at the beginning of year and the inventory at the end of the previous year is calculation. The cost of goods purchased and made during the year is added up and the inventory at the end of the year is subtracted. This calculation is done so the company will know how much the inventory cost and how much was sold by the company during the year. The inventory is reported at the cost to make or buy the product, it is not the cost to sell it. If sells items cost change during the year, the company much figure out a transaction to deal with those cost changes in a way suitable to the IRS. It would have to figure this change into their COGS equation. The IRS has quite a few standard ways to account for changes in cost through the year without having to track each product price