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Accounting At Your Fingertips, 2e by George Murray, CPA.

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5.5 Cost of Goods Sold

Comparing Cost Flow Assumptions

Factoring in Rising and Falling Prices

Lower of Cost or Market

Cost of goods sold (COGS) is often key in determining whether your business is profitable or it isn’t, so making sure this line item on the income statement gives a true picture of your costs is important. As we know from previous subchapters, in computing COGS and ending inventory, companies are given wide berth. This subchapter compares COGS when different inventory flow methods are used and also shows the impact of your choices on the bottom line.

Comparing Cost Flow Assumptions

Cost of goods sold is computed as follows:

Beginning inventory + Purchases – Ending inventory = Cost of goods sold

Your cost of goods sold varies ...

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