Manufacturing or Purchase Costs = $120,000 Peggy an accountant is in charge of the inventory and Cost of Sales as it posts to the income statement. sells printers and other computer components to the the general public. + Net Purchase (raw materials, labor, and overhead) The formula or Cost of Goods sold equation is as follows: Or they may find a component of the Cost of Goods Sold expense to reduce. The Gross Profit Margin percentage gives a company insight into what they need to charge for a certain product. Also, divide the Cost of Goods Sold by Sales to find Gross Profit Margin percentage. In fact, the Gross Margin is the result of Revenue minus the COGS. In addition, the Cost of Sales falls right underneath the Revenue or Sales on the Income Statement. Derive the COGS equation from the inventory which will be shown later. Cost of Goods Sold ExplainedĬost of Goods Sold, explained as being an expense, has a direct correlation with the inventory which is considered an asset.
It is also referred to as the Cost of Sales, and the two are used interchangeably. Indirect Cost Cost of Goods Sold (COGS) DefinitionĬost of Goods Sold ( COGS), defined as the inventory expense that is sold to customers and is known as the largest expense to a company.
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