The cost of goods sold is a variable cost for merchandise company, but contains a mixture of variable and fixed production costs for manufacturers.

Question

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For a merchandise company, the cost of goods sold (COGS) primarily consists of the cost of purchasing inventory, which varies directly with sales volume, making it a variable cost. However, for manufacturers, COGS includes both variable costs (like raw materials) and fixed costs (such as factory overhead), making it a mix of variable and fixed production costs.

The Cost of Goods Sold Is a Variable Cost for Merchandise