In a Standard Cost System,the Initial Debit to an Inventory

question 102

Multiple Choice

In a standard cost system,the initial debit to an inventory account is based on:

• A)standard cost rather than actual cost.
• B)actual cost rather than standard cost.
• C)actual cost less the standard cost.
• D)standard cost less the actual cost.

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Definitions:

Variable Costing

An accounting method that only includes variable production costs (costs that change with the level of output) in the cost of goods sold and treats fixed costs as period costs.

Absorption Costing

A pricing technique that integrates all expenses related to production, such as direct materials, direct labor, along with both variable and fixed overhead costs, into a product's cost.

Operating Income

Earnings before interest and taxes (EBIT), representing the profit from a company's main business activities.

Gross Profit

The difference between the revenue generated from sales and the cost of goods sold, excluding operating expenses, interest, and taxes.