CLO1

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Westcliff University *

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500

Subject

Accounting

Date

Jun 22, 2024

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docx

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6

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1 CLO Assignment 1 Michael Ayala Coba Westcliff University FIN500: Financial & Accounting Skills for Managers Professor Blount May 22, 2024
2 Please note: Abstracts are not required for student papers (they do not take the place of introductions) Only write an abstract if your professor specifically requires one (If it is required, please see these tutorials for assistance on structure and content: Abstract, Overview Abstract, Informative )
3 CLO Assignment 1 Cost of Goods Sold in Manufacturing vs Merchandising Companies The calculation of the cost of goods sold (COGS) in manufacturing companies differs from that in merchandising companies due to the nature of their operations. Manufacturing companies produce goods from raw materials, so their COGS includes raw materials, direct labor, and manufacturing overhead. The formula for manufacturing COGS is: Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory. Cost of Goods Manufactured encompasses all production costs incurred during the period, making the calculation more complex. (Wild & Shaw, 2022) (Ross et al., 2021) In contrast, merchandising companies buy finished goods for resale without altering them. Their COGS calculation is simpler, focusing on the cost of purchases and any freight-in costs. The formula for merchandising COGS is: Beginning Inventory + Purchases - Ending Inventory. The key differences lie in the components of costs and the complexity of the calculation, with manufacturing companies needing to account for multiple stages of inventory (raw materials, work-in-progress, and finished goods) and production costs, whereas merchandising companies primarily manage merchandise inventory. (Wild & Shaw, 2022) (Ross et al., 2021) Calculation The annual financial data at December 31, 2017, taken from two different companies are shown below:
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