To determine the Cost of Goods Sold (COGS) for a retail business, you need to use the correct formula. It involves combining the inventory values at the beginning and end of a period along with any additional purchases made during that period. The correctly constructed formula for COGS is:
Beginning Inventory + Inventory Purchases - End Inventory = Cost of Goods Sold
Here’s the step-by-step process to find COGS using this formula:
1. Identify the Beginning Inventory: This is the value of the inventory at the start of the period. For this example, let's assume the Beginning Inventory is 100 units.
2. Add Inventory Purchases: This is the total value of additional inventory purchased during the period. For example, if Inventory Purchases are 50 units.
3. Subtract End Inventory: This is the value of the inventory remaining at the end of the period. For example, if the End Inventory is 30 units.
Now, applying the values into the formula step-by-step:
- Step 1: Start with the Beginning Inventory:
[tex]\[
100
\][/tex]
- Step 2: Add Inventory Purchases to the Beginning Inventory:
[tex]\[
100 + 50 = 150
\][/tex]
- Step 3: Subtract the End Inventory from the result of step 2:
[tex]\[
150 - 30 = 120
\][/tex]
Hence, the Cost of Goods Sold (COGS) is 120.
Therefore, the correct formula is:
Beginning Inventory + Inventory Purchases - End Inventory = Cost of Goods Sold
