Cost of goods sold

Select the option that correctly represents the components included in the cost of goods sold (COGS)

• Rent expenses.

• Marketing and advertising costs.

• Raw materials and parts used to make the product.

• Utilities and overhead costs.

Raw materials and parts used to make the product

The cost of goods sold (COGS) includes raw materials and parts used to make the product. Rent, marketing, advertising, utilities, and overhead costs are recorded elsewhere in the books.

Entry 1: purchase of inventory

On April 10, the candle manufacturing business purchased $800 of inventory.

Entry 2: sale of scented candles to customer

The same day, the candle manufacturing business sold $1,500 of scented candles to a customer on credit.

Entry 3: adjustment to COGS and inventory

Finally, adjust COGS and inventory to reflect the cost of the $800 of inventory used to produce the candles sold.