If Year-End Inventory Is Reduced from Cost to a Lower

question 80

Multiple Choice

If year-end inventory is reduced from cost to a lower replacement cost, which of the following accurately depicts the results?

• A)The capital account balance is increased and beginning inventory of the next period is reduced by the same amount.
• B)Cost of goods sold is reduced and beginning inventory of the next period is reduced by the same amount.
• C)Year-end inventory is reduced and cost of goods sold is reduced by the same amount.
• D)Cost of goods sold is increased and ending inventory is decreased by the same amount.

---

Definitions:

Cost Per Unit

It represents the total cost incurred for producing, manufacturing, or acquiring a product divided by the number of units.

Volume Variance

A measure of the difference between the budgeted and actual volume of production, affecting costs or profitability.

Manufacturing Overhead

All manufacturing costs that are not direct labor or direct materials, such as utilities, depreciation, and maintenance of equipment.

Direct Labor-Hours

The total hours worked by employees directly involved in the manufacturing process.