In Order to Calculate Shrinkage

question 139

Multiple Choice

In order to calculate shrinkage:

• A)both periodic and perpetual inventory systems are needed.
• B)a periodic inventory system is more effective.
• C)a perpetual inventory system requires an occasional count of actual inventory.
• D)it does not matter which system one uses.

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Definitions:

Variable Costing Income Statement

A financial statement format that only includes variable costs in the calculation of cost of goods sold, making it useful for internal decision-making.

Variable Cost of Goods Sold

Expenditures that fluctuate in direct relationship with the amount of goods produced or sold, for instance, materials and labor costs.

Gross Profit

The difference between sales revenue and the cost of goods sold, indicating the efficiency of a company's core operations.

Fixed Costs

A repetitive charge that does not fluctuate with the volume of business activity, including expenses like lease payments and utility bills.