A Company Purchased Inventory for $2,000 from a Vendor on Account

question 103

Multiple Choice

A company purchased inventory for $2,000 from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company paid the shipper $100 cash for freight in. The company then returned damaged goods worth $200. The invoice has been paid 8 days after the sale. Assuming that there was no beginning inventory balance, the cost of inventory would be: (Assume a perpetual inventory system)

• A)$1,764.
• B)$1,864.
• C)$2,100.
• D)$1,900.

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Definitions:

Marginal Cost

The expansion in total financial commitment from producing one extra unit of a product or service.

Total Cost

The aggregate expense incurred in the manufacture or delivery of a product, including all overheads.

Marginal Cost Curve

The marginal cost curve graphically represents the cost incurred in producing one additional unit of a good.

Average Fixed Cost

Represents the fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced.