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How are COGS and inventory-related?

Asked 2 years ago

Hi, I'm new here. I learned in a video that the inventory valuation includes your COGS, but I don't understand how this is related?

Ali Reyes

Sunday, May 08, 2022

Inventory valuation is a potential COGS. The future profits of a company depend on how they maintain their inventory. I'll explain this further with an example.

Inventory has 5000 units. On day 1, 100 products are sold, so the closing stock is 4900 products. The next day 500 products are sold. The closing inventory is 4300 products, while the rest of the 600 products are now included in COGS.

Jolina Regin

Tuesday, May 24, 2022

COGS means how much it costs to produce your goods or services while inventory is a list of items that a business has. To calculate COGS inventory must be included, its opening inventory plus purchases minus closing inventory. When closing inventory reduces, the COGS increases, and when closing stock increases then the COGS reduces.

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