Why when we say inventory decrease (write-down), the COGS will increase?? I think in a way that when inventory wrtie-down, there will be less (value) of inventory, therefore cost of selling less value of inventory will be decreased (COGS decrease). Would anyone correct me on this? Thanks.

Beginning inventory + Purchase - ending inventory = COGS Lets say its, 200+100-50= 250 If inventory w/d happens i.e ending inventory decrease to for eg. 25 It will be 200+100-25 = 275 i.e increase in COGS Let me know if makes sense.

A write-down of inventory isn't just assuming they were never there, but rather taking the loss. One way to think of this is "selling your inventory at $0", so your cost of written-off inventory becomes COGS.

A CFA Level 1 Discussion About Inventory And COGS Relationship

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This topic has 2 replies, 3 voices, and was last updated Jul-218:19 pm by Zee Tan.

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- KajalDighe
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  - CFA Level 1
  10 Jul 2021 at 10:02 am
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  Beginning inventory + Purchase – ending inventory = COGS
  Lets say its, 200+100-50= 250
  If inventory w/d happens i.e ending inventory decrease to for eg. 25
  It will be 200+100-25 = 275 i.e increase in COGS
  
  Let me know if makes sense.
- Zee Tan
  Keymaster
  - CFA Charterholder
  10 Jul 2021 at 8:19 pm
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  0
  ::
  A write-down of inventory isn’t just assuming they were never there, but rather taking the loss.
  
  One way to think of this is “selling your inventory at $0”, so your cost of written-off inventory becomes COGS.
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