Question

Question: Explain the difference between cost of goods manufactured and cost of goods sold.

Short answer

Answer:

Cost of goods manufactured are the manufacturing cost incurred by the company on finished goods produced during the year. And the cost of goods sold are the production cost incurred on the goods actually sold during the year.

Step-by-step solution

Cost of goods manufactured

Cost of goods manufactured means the total cost incurred by an organization for production of the products during the specific period.

Cost of goods sold

Cost of goods sold is the total expense incurred by an organization as an expense directly related to the sale of products. It is different from cost of goods manufactured, because it is the cost of the product actually sold.