If the cost of goods sold is less than the cost of goods manufactured, what happens to Finished Goods Inventory during the period?

When the cost of goods sold is less than the cost of goods manufactured, it indicates that more goods have been produced than sold during that period. This results in an increase in Finished Goods Inventory.

In this scenario, the excess production over the sales means that the remaining unsold goods will be added to the Finished Goods Inventory, which reflects the total value of products that are available for sale but have not yet been sold. As these manufactured goods accumulate without corresponding sales, the inventory balance rises, leading to an overall increase in Finished Goods Inventory for that period.

This relationship is fundamental in understanding how production and sales affect inventory levels in a business.