Which of the Following Is True of Finished Goods Inventory

question 8

Multiple Choice

Which of the following is true of finished goods inventory?

• A)Finished Goods Inventory is an account used by a manufacturer and includes completed goods that have not yet been sold.
• B)Finished Goods Inventory is an account used by a merchandiser and includes completed goods that have not yet been sold.
• C)Finished Goods Inventory is an account used by service companies in lieu of raw materials inventory.
• D)Finished Goods Inventory is an account used by a manufacturer in lieu of raw materials inventory.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or jobs, based on a certain activity, such as direct labor hours or machine hours.

Direct Labor-Hours

The total time spent by workers directly involved in the manufacturing process.

Unit Product Cost

The total cost (direct materials, direct labor, and overhead) to produce a single unit of a product.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to apply manufacturing overhead costs to products based on a specific activity base.