Question

Cost of goods sold:

a) appears on both manufacturing and merchandising companies' income statements.
b) is calculated exactly the same for merchandising and manufacturing
companies.
c) only appears on manufacturing companies' income statements.
d) only appears on merchandising companies' income statements.

Answer 1

The cost of goods sold appears on both manufacturing and merchandising companies' income statements, but it is calculated differently for each type of company.

Step-by-step explanation:

The cost of goods sold (COGS) appears on both manufacturing and merchandising companies' income statements. This is because it represents the direct costs attributable to the production of the goods sold by a company, which are subtracted from revenue to determine gross profit.

However, the way COGS is calculated differs between merchandising and manufacturing companies. In a merchandising company, COGS is primarily the cost of purchasing inventory that is then sold to customers, whereas in a manufacturing company, COGS includes costs such as raw materials, labor, and manufacturing overhead linked to the production of goods.