An Example of an Inventory Accounting Policy That Should Be

question 13

Multiple Choice

An example of an inventory accounting policy that should be disclosed in a Summary of Significant Accounting Policies is the

• A)composition of inventory into raw materials, work-in-process, and finished goods.
• B)major backlogs of inventory orders.
• C)method used for pricing inventory.
• D)All of the above should be disclosed.

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Definitions:

Net Income

The amount of revenue left over after all expenses and taxes have been deducted.

Variable Costing

Variable costing is an accounting method in which only variable production costs (direct materials, direct labor, and variable manufacturing overhead) are included in the cost of goods sold, with fixed overhead expenses treated as period costs.

Variable Overhead

The overhead costs that fluctuate with the level of production activity, such as utilities and materials used in production.

Product Costs

The costs directly associated with the production of goods, including materials, labor, and manufacturing overhead.