Assume a Company Uses the Periodic Inventory System and Has

question 194

Multiple Choice

Assume a company uses the periodic inventory system and has a beginning merchandise inventory balance of $5,000,purchases of $75,000,and sales of $125,000.The company closes its records once a year on December 31.In the accounting records,the merchandise inventory account would be expected to have a balance on December 31 prior to adjusting and closing entries that was

• A) indeterminate.
• B) less than $5,000.
• C) more than $5,000.
• D) equal to $5,000.

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Definitions:

Break-Even Point

The point at which total costs and total revenue are equal, resulting in no net gain or loss.

Variable Cost

A cost that changes in proportion to the level of output or activity.

Variable Costs

Costs that vary directly with the level of production or output, such as materials and labor.

Contribution Margin

The selling price per unit, minus the variable cost per unit, used to determine the profitability of products or services.