Advocates of Throughput Costing Argue That ________

question 27

Multiple Choice

Advocates of throughput costing argue that ________.

• A) fixed manufacturing costs must be included as inventoriable costs and provide less incentive than absorption costing to build-up inventory to increase profits
• B) direct manufacturing labor is relatively fixed and therefore should not be included in inventory costs
• C) direct materials costs are a cost of the period and therefore should not be included in inventoriable costs
• D) including only direct materials as inventoriable costs provides less incentive than absorption costing to produce a build-up of inventory merely to increase profits

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Definitions:

Controlling Account

A general ledger account that summarizes the total balances of all subsidiary accounts related to it.

Perpetual Inventory Method

An inventory management system where updates are made continuously as inventory items are purchased and sold, providing real-time inventory levels.

General Journal Entry

A record in the general journal that represents the detailed listing of a company's financial transactions.

Terms 2/10, N/30

Payment terms indicating a 2% discount if the amount is paid within 10 days; otherwise, the net (full) amount is due within 30 days.