In a Perpetual Inventory System,paying Transportation Charges on Goods Purchased

question 21

Multiple Choice

In a perpetual inventory system,paying transportation charges on goods purchased FOB shipping point would have which of the following effects?

• A)Decrease Operating Expenses
• B)Increase Selling,General,and Administrative Expenses
• C)Decrease Cost of Goods Sold
• D)Increase Inventory

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Definitions:

Plantwide Predetermined Rate

A single overhead rate calculated by dividing total estimated overhead costs by an expected base for the entire plant.

Machine-Hours

A measure of production output or operation, indicating the total hours machines are running in the manufacturing process.

Markup

The surcharge applied to the original cost of items to compensate for overhead expenses and secure earnings.

Plantwide Predetermined Rate

A single overhead rate calculated using the total estimated overhead costs divided by an estimated allocation base for an entire factory or plant.