COGS and Inventory
A brief introduction to inventory, cost of goods sold, and how they relate to each other. This is meant to be a brief overview before we really dive in.
There are a couple of things that can be taken out of sales to get us down to "Net Sales". You'll need to pay close attention, because these exact same things will apply to purchases too.
Perpetual vs Periodic
The two methods of inventory tracking. And, surprise, we're going to talk some more about words.
What in the world does FOB mean? I'm not really sure, but that's ok, you wont miss any FOB questions if you can draw a line.
Transportation in matters, but transportation out never really gets talked about. What's the deal with that?
How can we figure out COGS under the periodic inventory system? By making up a formula, of course.
Drawbacks to Periodic
The Periodic inventory has a couple of drawbacks, which we will discuss here.
Of the inventory costing methods, specific identification is by far the easiest, and the least used.
Weighted average is another inventory costing method that applies a single average cost to all the units.
FIFO and LIFO
FIFO and LIFO are the two most commonly used inventory costing methods. And they are also the only accounting terms that most people remember years later.
Estimating with Gross Profit
The Gross Profit Method is a way to estimate what our Cost of Goods Sold is, without having to do a physical inventory count.