A Manufacturer Uses Standard Costing, and a Potential Supplier Uses

question 211

Multiple Choice

A manufacturer uses standard costing, and a potential supplier uses activity-based costing. This difference most likely will have implications for which of the following types of future decisions?

• A) Price concessions
• B) Make-or-buy
• C) Distribution warehouse locations
• D) Freight terms

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Definitions:

Merchandise Inventory

Goods that a company holds with the intent to sell them as part of its business operations; considered a current asset on the balance sheet.

Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific date, showing assets, liabilities, and shareholders’ equity.

Current Asset

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of a business.

Periodic Inventory System

An accounting method where inventory values and cost of goods sold are determined at the end of an accounting period.