If ending finished goods inventory is larger than beginning finished goods inventory, then cost of goods sold is less than the sum of direct materials + direct labor + overhead.

Question

Quizplus · Accepted Answer

When ending finished goods inventory is larger than beginning finished goods inventory, it indicates that not all goods produced were sold. Therefore, the cost of goods sold (COGS) would only include the cost of the goods that were actually sold, which could be less than the total production costs (sum of direct materials, direct labor, and overhead) for the period.

If Ending Finished Goods Inventory Is Larger Than Beginning Finished