Sales and cost of goods sold generally move together unless there have been changes in purchase prices, quantities purchased, or quality of products. Which statement is true?

• A. True
• B. False
• C. Not enough information
• D. It depends on the industry

Answer: (A)

Sales and cost of goods sold move in tandem because COGS is the cost of the goods actually sold. When more units are sold, more cost is recognized as COGS, assuming the unit cost and the mix of products stay the same. This keeps the two figures aligned under normal conditions. The relationship can diverge if purchase prices change, if you buy different quantities, or if product quality changes, which can alter the cost per unit or the mix of goods sold. In that case, COGS may not rise exactly in step with sales. So the statement is true.