A Company Started the Year with a Normal Balance of $136,000

question 166

Multiple Choice

A company started the year with a normal balance of $136,000 in the Inventory account.During the year,debits totaling $90,000 and credits totaling $110,000 were posted to the Inventory account.Which of the following statements about the Inventory account is correct?

• A)The normal balance of the Inventory account is a credit balance.
• B)After these amounts are posted,the balance in the Inventory account is a credit balance of $116,000.
• C)The Inventory account is decreased by debits.
• D)The debits and credits posted to the Inventory account caused it to decrease by $20,000.

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Definitions:

Product Cost

Product cost encompasses all costs directly involved in manufacturing a product, including raw materials, labor, and manufacturing overhead.

Absorption Costing

A method of product costing that includes all manufacturing costs, both fixed and variable, in the cost of a product.

Total Product Cost

The complete cost of producing a product, including direct materials, direct labor, and both variable and fixed overhead.

Cost-Volume-Profit Analysis

An accounting technique used to determine how changes in costs and volume affect a company's operating income and net income.