If a Company Uses the Periodic Inventory System, What Is

question 68

Multiple Choice

If a company uses the periodic inventory system, what is the impact on net income of including goods in transit F.o.b. shipping point in purchases, but not ending inventory?

• A) Overstate net income.
• B) Understate net income.
• C) No effect on net income.
• D) Not sufficient information to determine effect on net income.

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Definitions:

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity of output produced.

Marginal Cost

Marginal cost is the additional cost incurred in the production of one more unit of a good or service.

General Motors

An American multinational corporation that designs, manufactures, markets, and distributes vehicles and vehicle parts.

Total Profit

The total income a business obtains after accounting for all expenses, taxes, and costs associated with its operations.