Yes, you are correct. Assuming you are a small business, (gross receipts of less than $27 million) you can choose to not keep an inventory. If you choose to not keep an inventory, you still will need to use a consistent method of accounting and you cannot double dip.
So, if you claim all of your inventory as an expense, you cannot deduct any cost of goods sold or you would be double dipping with the cost of your supplies. You can do this as long as you have started selling or put the items out for sale and you are not just collecting the material. If you choose to expense your materials, then yes, you can skip Part III.
If however, your sales are greater than $27 million, you must choose an inventory method.
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