Question

Below are data for two​ companies:

1. Define the three business​ types: service,​ merchandising, and manufacturing.

2. Based on the data given for the two​ companies, determine the business type of each one.

3. Calculate the cost of goods sold for each company.

Company A                       Company B

Beginning balances:

Merchandise Inventory                           $10,200

Finished Goods Inventory                                                                            $15,200

Ending balances:

Merchandise Inventory                                 12,900

Finished Goods Inventory                                                                               12,300

Net Purchases                                                            155,000

Cost of Goods Manufactured                                                                                            211,00

Answer 1

1.) Service :- It is type of business which works for the customers whose primary objective to provide services and sometimes also provide product as supporting thing to service, but it doesn't involve manufacturing.

Merchandise :- It is a type of business which involves sale and purchase of goods without working on them, it is commonly known as retail business.

Manufacturing :- It is a type of business which requires raw material, parts, semifinished goods to make a finished goods.

2.) Company A is in Merchandise business and Company B is in manufacturing business.

3.) Cost of goods sold :-

Company A = beginning balance + net purchase - ending balance

= 10,200 + 155,000 - 12,900

= 152,300

Company B = Beginning FG + cost of goods manufactured - ending FG

= 15,200 + 211,000 - 12,300

= 238,500