ACCT 2102 1nd Edition Lecture 3 Outline of Last Lecture II Profit A Three Basic Business Models III Costs A The Value Chain B Cost Object IV Income Statement Formulas Outline of Current Lecture V COGS for a Merchandising Company VI COGS for a Manufacturing Company Current Lecture COGS for a Merchandising Company COGS is the cost of goods sold For a merchandising company this can be written as the beginning inventory of merchandise plus the total units plus purchased units minus the ending inventory COGS can also be written as the units sold multiplied by the inventorial product cost The Inventorial product cost is all product cost added together for example product tax import shipping and purchase price COGS for a Manfucaturing Company COGS for a manufacturing company is much more complicated In order to find the COGS you need to find the Direct Material used DM and the cost of goods manufactured COGM The direct material used formula is th beginning inventory of raw material plus the purchased raw material minus ending raw material inventory For COGM you take the beginning inventory of work in progress plus the DM found in the previous equation plus direct labor plus MOH minus the ending works in progress inventory Once you have received a number for COGM you can take this number and add the beginning inventory of finished goods minus the ending inventory of finished goods to find the COGS COGS can be found for a number of things However the most common is gross profit and operating income Remember from last lecture that both of these calculations need COGS These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute therefore expect problems where you use the equations of DM and COGM to find COGS that you will then use to find Gross Profit and Operating Income
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