Mid - Term Notes.docx

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Published on 12 Apr 2012
Mid - Term Notes
10:53 AM
Manufacturing concerns produce inventory in-house and calculate cost of goods sold as follows:
Beginning Inventory + Cost of Goods Manufactured - Ending Inventory = Cost of Goods Sold
Cost of Goods Manufactured includes three components:
Direct materials used
Direct labour
Manufacturing overhead (indirect expenses such as indirect labour and materials, utilities and
rent for the plant, etc)
Merchandising concerns purchase inventory from suppliers and calculate cost of goods sold
as follows:
Beginning Inventory + Purchases = Cost of Goods Sold + Ending Inventory
Purchases include the cost of the products themselves plus costs such as freight, duty, taxes
that are incurred in bringing the inventory to the seller’s location
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