Which One of the Following Is the Correct Formula for Determining

question 98

Multiple Choice

Which one of the following is the correct formula for determining budgeted merchandise purchases?

• A)Budgeted sales + desired ending inventory - beginning inventory
• B)Budgeted production - sales + beginning inventory - desired ending inventory
• C)Budgeted sales - cost of goods sold + desired ending inventory - beginning inventory
• D)Budgeted sales - cost of goods sold + beginning inventory - desired ending inventory

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Definitions:

Period Costs

Expenses on the income statement not directly tied to the production of goods, such as administrative and selling expenses.

Conversion Costs

The sum of labor costs and overhead expenses associated with transforming raw materials into finished goods.

Factory Overhead Costs

All the indirect costs associated with manufacturing, excluding direct materials and direct labor costs; includes costs such as maintenance, utilities, and rent.

Factory Overhead

All the indirect costs associated with the production process, such as utilities, maintenance, and salaries for production managers.