If a Company Determines Cost of Goods Sold Each Time

question 151

Multiple Choice

If a company determines cost of goods sold each time a sale occurs, it

• A)must have a computer accounting system.
• B)uses a combination of the perpetual and periodic inventory systems.
• C)uses a periodic inventory system.
• D)uses a perpetual inventory system.

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Definitions:

Cost of Goods Manufactured

The total production cost of goods completed and transferred out of the work-in-progress inventory during a specific period.

Direct Materials

Raw materials that are directly traceable to the production of specific goods.

Factory Overhead

All indirect manufacturing costs, including costs related to running the factory that cannot be directly tied to a specific product.

Prime Costs

The combination of direct material and direct labor costs that are directly involved in manufacturing a product.