When the Average Cost Method Is Applied in a Periodic

question 101

Multiple Choice

When the average cost method is applied in a periodic inventory system,

• A)the sale of goods during the year will change the unit cost used for calculating ending inventory.
• B)an average cost per unit is calculated after each purchase rather than at the end of the period.
• C)an average cost per unit is calculated at the end of the period rather than after each purchase.
• D)an average cost per unit is not calculated in the same manner that is used for a perpetual inventory system.

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Definitions:

Change in Total Utility

The difference in the overall satisfaction a consumer receives before and after the consumption of an additional unit of a good or service.

Consuming One More Unit

The action or decision of using up an additional unit of a good or service and its impact, often related to marginal utility.

Budget Line

A graphical representation that shows all possible combinations of two goods that an individual can afford given their income and the prices of the goods.

Consumer Income

The total money earned by consumers from all sources, including wages, salaries, investments, and benefits, which impacts their purchasing power.