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Question
Calculating cost of goods sold for merchandising and manufacturing companies
Below are data for two companies:
Company 1 Company 2
Beginning balances:
Merchandise Inventory \( 11,600
Finished Goods Inventory \) 15,400
Ending balances:
Merchandise Inventory 12,400
Finished Goods Inventory 11,300
Net Purchases 152,500
Cost of Goods Manufactured 214,500
Requirements
1. Define the three business types: service, merchandising, and manufacturing.
2. Based on the data given for the two companies, determine the business type of each one.
3. Calculate the cost of goods sold for each company
Step-by-Step Solution
VerifiedThe service company sells services, the merchandising company sell purchased from others and the manufacturing company sells the goods produced by themselves. Company A is a merchandising company and Company B is a manufacturing company. The COGS of Company A is $151,700 and company B is $218,600.
Service companies are defined as the company which sell their time, skills, and knowledge to the customers and clients of the company
A merchandising company is defined as a company that resells products they buy from the suppliers. Merchandisers keep the inventory of products.
A manufacturing company is a company that uses labor, equipment, supplies, and facilities to convert raw materials into finished goods and sell them.
Company 1 is a merchandising company as its particulars include the data for merchandising inventory
Company 2 is a manufacturing company as its particulars include the data for ending and beginning balance of finished goods inventory and cost of goods manufactured.