Best Buy reports in notes to its financial statements that, in addition to its merchandise sold, it includes the following costs (among others) in cost of goods sold: freight expenses associated with moving inventories from vendors to distribution centers, costs of services provided, customer shipping and handling expenses, costs associated with operating its distribution network, and freight expenses associated with moving merchandise from distribution centers to retail stores.

Required
1. Why do you believe Best Buy includes these costs in its cost of goods sold?
2. What effect does this cost accounting policy for its cost of goods sold have on Best Buy’s financial statements and any analysis of these statements? Explain.
Fast Forward
3. Access Best Buy’s financial statements for the fiscal years after March 3, 2007, from its Website (BestBuy.com) or the SEC’s EDGAR Website (sec.gov). Review its footnote relating to Cost of Goods Sold and Selling, General, and Administrative Expense. Has Best Buy changed its policy with respect to what costs are included in the cost of goods sold? Explain.