Assume a Company Uses the Periodic Inventory System

question 92

Multiple Choice

Assume a company uses the periodic inventory system. Which of the following accounts would not be affected when recording purchases and related transactions?

• A)Merchandise Inventory
• B)Purchase Returns and Allowances
• C)Purchase Discounts
• D)Purchases

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Definitions:

Idle Capacity

Unused or underused production capability, which occurs when a business has more resources available than is required to maintain its current level of production.

Traced Costs

Direct costs, such as materials and labor, that can be directly linked to the production of specific products or services.

Drop the Product

The decision to discontinue the production and sale of a particular product, often due to low demand or profitability.

Activity-based Approach

A methodological approach that focuses on identifying and managing activities as the fundamental cost objects, aiming to improve business processes and allocate costs more precisely.