When Using a Periodic Inventory System, Which Statement Concerning the Computation

question 65

Multiple Choice

When using a periodic inventory system, which statement concerning the computation of cost of goods sold is correct?

• A)The amount of ending inventory is determined on the last day of the accounting period.
• B)Cost of goods available for sale includes net purchases plus the ending inventory.
• C)Purchases represent cash paid for purchases during the accounting period.
• D)Freight-in is ignored.

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Definitions:

Direct Manufacturing Cost

The sum of all the costs directly associated with the production of a good, including raw materials and direct labor.

Indirect Manufacturing Costs

Costs related to production that cannot be directly traced to specific products, such as maintenance and utilities.

Contribution Margin

The margin between the income from sales and the costs that vary, pointing out the contribution towards absorbing fixed charges and producing profits.

Variable Manufacturing Costs

Costs of production that fluctuate with the volume of output, including expenses like raw materials and direct labor.