If finished goods inventory increases between the beginning and the end of the year, then the...

If finished goods inventory increases between the beginning and the end of the year, then the cost of goods sold is smaller than the cost of goods manufactured. true or false

Expert Solution

Answer :True

Cost of Goods Sold is Smaller than the Cost of Goods Manufactured.

Since the Finished Goods Increased During the year, All the goods Manufacturing are not sold. Cost of Goods Sold is the cost for all the goods Whereas the Cost of Goods Sold is the cost incurred to Manufacture the goods sold and to find cost of goods sold we just add beginning finished goods inventory and deduct ending finished goods inventory in cost of goods manufactured for the year.

Suppose cost of goods manufacture $100,000 beginning finished goods inventory $5,000 and ending finished goods inventory $10,000

Cost of goods sold:-

Cost of goods manufactured	$100,000
Add: beginning finished goods inventory	$5,000
Less: ending finished goods inventory	$10,000
Cost of goods sold	$95,000

In this way we can say that cost of goods sold is smaller than the cost of goods manufactured if finished goods inventory increases between the beginning and the end of the year.

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ekkarill92 answered 1 year ago

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