Question

Orbit, Inc. has sales of 28,000, beginning inventory of 3,500, purchases of 17,500, and ending inventory of 4,900. The cost of goods sold is ____________.

Answer 1

The Cost of Goods Sold (COGS) for Orbit, Inc. is calculated by adding the beginning inventory ($3,500) and purchases ($17,500), subtracting the ending inventory ($4,900), resulting in a COGS of $16,100.

Step-by-step explanation:

The calculation of Cost of Goods Sold (COGS) is an essential element in determining the profits and inventory management efficiency of a business like Orbit, Inc. To compute the COGS, we begin with the beginning inventory, which is the value of all the products available for sale at the start of the period. To this, you add the purchases made during the period, which increases your inventory. Finally, you subtract the ending inventory, which is the value of unsold goods at the end of the period. Using the provided figures, the calculation is as follows:

COGS = Beginning Inventory + Purchases - Ending Inventory

COGS = $3,500 (Beginning Inventory) + $17,500 (Purchases) - $4,900 (Ending Inventory)

COGS = $16,100

Therefore, the cost of goods sold for Orbit, Inc. is $16,100. This figure reflects the total cost related to the goods that were actually sold during the period and is vital for understanding the company's gross profit when deducted from total revenue.