Answer to Question #244253 in Accounting for samantha

Question

Directions: Answer the following questions with the most correct answer whether the selection is in multiple-choice or supply the answer.

Cost of Goods Sold, (COGS), can also be referred to as cost of sales (COS), cost of revenue, or product cost, depending on if it is a product or service. It includes all the costs directly involved in producing a product or delivering a service.

5. Which of the following is the correct formula in finding COGS or COS? (1 point)

a.The COS for manufacturing entities is zero because of its value in deflation.

b.The COS for merchandising entities is goods available for sale minus the ending

amount of inventories.

c.The COS for service entities is service available for sale plus the beginning

service inventories.

d.The COS for service entities is equal to the adjusted market selling price.

6. Explain why the three items you have not chosen above are incorrect.

Answer 1

5.(b.) The COS for merchandising entities is goods available for sale minus the ending

amount of inventories.

6.5(a) is incorrect because the COS for manufacturing entities is equal to all costs directly tied to the production of of the products, including the cost of labor, direct materials and manufacturing overhead.

5(c) is incorrect because it leaves out the subtraction of the ending service inventories.

5(d) is incorrect because the COS for service entities cannot be equal to the adjusted market selling price. The adjusted market selling price is usually higher as it incorporates the cost of sales and gross margin.