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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- alanjiler
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  - CFA Level 1
  10 Jul 2021 at 6:18 am
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  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.
  
  Jump to the accepted answer
- KajalDighe
  Participant
  - 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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