MGT120H5 Chapter Notes - Chapter 6: Gross Profit, Gross Margin, Weighted Arithmetic Mean
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MGT120H5 Full Course Notes
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Cogs is an expense when it is sold: merchandise inventory is the heart of a merchandising business, and cost of goods sold is the most important expense for a company that sells goods rather than services. Please look on page 285 for the new incomes statement. Inventory is listed as an asset on the balance sheet: manufacturing (raw materials) and service (office supplies and other items) companies both have inventories. Gross profit/gross margin, is the excess of sales revenue over cogs. It"s called gross profit because operating expenses haven"t been subtracted. Inventory = # of units of inventory on hand * cost per unit of inventory. Cogs = # of units of inventory sold * cost per unit of inventory. The number of units of inventory is determined by a physical count of goods at year end. *** determining the ownership of inventory at the time of shipment depends on who has legal title.
