Question

Classic autos specializes in selling gently used specialty sports cars and uses the specific identification method of determining ending inventory and cost of goods sold. item 507k was sold for​ $90,000. classic purchased the sports car for​ $50,000 and paid​ $1,800 for freight in and​ $1,000 for freight out. what is the cost of goods​ sold?

Answer 1

The Cost of Goods sold is $52,800.

$Cost of Goods Sold = Cost of Product + Freight-in+ Freight-Out$

$Cost of Goods Sold = 50,000 + 1,800 + 1,000 = ,52,800$

Cost of goods sold refers to the all the costs that are directly associated with the production of a product. This includes cost of raw materials, direct labour and any other costs that are directly attributable to the production of a product.

Freight -in refers to transportation cost incurred at the time of the delivery of goods from a supplier.

Freight out refers to the cost of transporting goods from a supplier to a customer, and are borne by the supplier.

Both freight-in and freight-out are included in the Cost of Goods Sold of a business organization.