Desired ending inventory is 25% more than beginning inventory. If purchases total $160,000, which of the following statements is TRUE regarding cost of goods sold (COGS)?

Question

Quizplus · Accepted Answer

COGS will be less than purchases because the desired ending inventory being 25% more than the beginning inventory implies that not all purchased goods will be sold; some will be added to inventory, thus reducing the COGS compared to the total purchases.

Desired Ending Inventory Is 25% More Than Beginning Inventory