Which one of the following is the basis of Cost of Goods Sold?
A) Cost of Goods Sold is based on the value of the merchandise when it is sold.
B) Cost of Goods Sold is based on the entity's cost.
C) Cost of Goods Sold is based on the selling price of the merchandise.
D) Cost of Goods Sold is based on the net realizable value of the merchandise.

Question

Quizplus · Accepted Answer

Cost of Goods Sold (COGS) is calculated based on the cost incurred by the entity to acquire or produce the merchandise that has been sold to customers. This includes the purchase price of goods, as well as any additional costs necessary to get the goods into a sellable condition, but does not directly relate to the selling price or the net realizable value of the merchandise.

Which One of the Following Is the Basis of Cost