The Ending Merchandise Inventory for the Current Accounting Period Is

question 49

Multiple Choice

The ending merchandise inventory for the current accounting period is overstated by $3,500. What will be the effect of this error?

• A)Net income for the current accounting period will be overstated by $3,500.
• B)Cost of goods sold for the current accounting period will be overstated by $3,500.
• C)Ending merchandise inventory for the next accounting period will be overstated by $3,500.
• D)Cost of goods sold for the next accounting period will be understated by $3,500.

Understand and calculate carrying and restocking costs for inventory management.

Analyze the financial implications of changing credit policies on sales and customer acquisition.

Calculate the incremental cash flow resulting from policy changes.

Evaluate the cost-effectiveness of subscribing to a credit reporting agency.

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Definitions:

Overhead Cost

The ongoing, general business expenses not directly tied to producing goods or services but necessary for running the business.

Traditional Costing

A costing method that assigns factory overhead to products based on volume-related measures such as direct labor hours or machine hours.

Product B

A generic term used to differentiate one product from another in a specific context, often used for analysis, comparison, or as an example.

Direct Labor-Hours

The total hours of labor directly involved in manufacturing a product, often used as a basis for allocating overhead costs.