In a traditional format income statement for a merchandising

In a traditional format income statement for a merchandising company, cost of goods sold is a variable cost that is included in the \"Variable expenses\" portion of the income statement. IS IT TRUE OR FALSE

Solution

True.

In traditional format income statement is based on absorption costing in which cost of goods sold is first deducted from sales to get the gross profit/contribution. in merchandising company goods are purchased and sold. In lack of any manufacturing process what we purchase will become the cost of goods sold when it will be sold with the inclusion of carriage inward. Hence it is a variable expense and will be directly changes with the units sold.