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Hallo,
I am trying to find the answer why increase/decrease in Work-in-Progress leads to decrease/increase in CoGS respectively? What is the explanation for that?
I was trying to think of it, as if we take an example with closing inventory, being higher or smaller, meaning we have sold less (or had theft) or more, but I can’t match the two principles.
Thank you!
Hallo,
I think I udnerstood it, I was looking at an example and have missed a minus sign, which confused me, but now it fits. So, if we have increase in WIP, we haven’t used raw materials as much to produce finished goods and sell them, so we haven’t sold more goods, and our CoGS is lower, and if we have a decrease in WIP, we have used more materials for production, so we should sell more, and then our CoGS is higher, is this correct?
Thank you!
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