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How does beginning and ending inventory affect cost of goods

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How does beginning and ending inventory affect cost of goods sold?

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Solution Summary

The 261 word solution first explains the concepts and then uses a comparative example to demonstrate the effects of changes in inventory.

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First, here is the formula for computing cost of goods sold:

Beginning inventory + purchases + other inventory costs - ending inventory = cost of goods sold

Following are some true statements about the components of cost of goods sold:

1. If inventory is constant, then cost of goods sold will consist of purchases (and other inventory costs).
2. If ending inventory is less than beginning inventory, then cost of goods sold will increase ...

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