Multiple Choice
In break-even analysis, which of the following assumptions is made?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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A company uses the periodic inventory system. At the beginning of the year, inventory was $\$10,000$. During the year, purchases amounted to $\$25,000$. At year-end, the physical count shows ending inventory of $\$8,000$. What is the Cost of Goods Sold (COGS) for the year?
A
$\$35,000$
B
$\$17,000$
C
$\$27,000$
D
$\$23,000$
Verified step by step guidance1
Step 1: Understand the formula for Cost of Goods Sold (COGS) under the periodic inventory system. The formula is: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).
Step 2: Identify the values provided in the problem. Beginning Inventory is \( \$10,000 \), Purchases are \( \$25,000 \), and Ending Inventory is \( \$8,000 \).
Step 3: Substitute the values into the formula. This gives: \( \text{COGS} = \$10,000 + \$25,000 - \$8,000 \).
Step 4: Perform the addition first: \( \$10,000 + \$25,000 \). Then subtract \( \$8,000 \) from the result.
Step 5: The final value obtained after performing the calculations will be the Cost of Goods Sold (COGS) for the year.
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