Chapter 14, Problem 10E

To determine

Cost of Goods Sold (COGS):

Cost of goods sold is the total expense or the cost incurred by the business during the process of manufacturing of goods and is directly related to the production. It generally includes the cost of material, labor and other manufacturing support costs.

Cost of Goods Manufacture (COGM):

Cost of goods manufacture is the cost related with the goods which were being manufactured within a fiscal year. The following cost covers labor cost, unprocessed material used cost and any other support cost which helped to reshape the unfinished into end goods or materials which have entered the production process thus have consumed of reasonable cost.

Cost of Purchases:

The value given to acquire the inventory for the production process is termed as cost of purchases.

Merchandise Inventory:

Merchandise inventory is the one which is purchased from the manufacturer with the purpose to sell it to the third party. Wholesalers, retailers, or distributors are ones who indulge into purchasing the products at a lower price and selling them at a higher price so to earn profits.

Finished Inventory:

The inventory which has gone through the production process and is all set to get vend or sold is the finished inventory.

To compute: Cost of goods sold for each of the two companies for the year ended December 31, 2017.