Greene Company Purchases $5,000 Inventory with Shipping Terms,FOB Columbus

question 69

Multiple Choice

Greene Company purchases $5,000 inventory with shipping terms,FOB Columbus.Greene is based in Dayton and the supplier is based in Columbus.The shipping costs are $460.What is the cost of Greene's inventory?

• A)$5,000
• B)$5,460
• C)Either $5,000 or $5,460 is an acceptable amount to assign to inventory cost under GAAP.
• D)There is not enough information to calculate inventory cost.

---

Definitions:

Variable Costs

Expenses that change in proportion to the amount of goods produced or the extent of services rendered.

Sales Quantity

The total number of units of a product sold in a particular period.

Fixed Costs

Expenses that are constant in total, regardless of changes in the volume of activity within a relevant period.

Total Fixed Cost

Total fixed cost is an accounting term describing the sum of all expenses within a company that do not change with the level of production or sales, such as rent, salaries, and insurance.