Identify Whether the Following Are Benefits of Using a Perpetual

question 26

Essay

Identify whether the following are benefits of using a perpetual inventory system (in comparison to a periodic system).
$$\begin{array} { | l | l | } \hline \text { Potential benefit } & \text { True/False } \\\hline \text { A perpetual system is less costly than a periodic system. } & \\\hline \text { A perpetual system produces information that is more useful for inventory } & \\\text { management. } & \\\hline \begin{array} { l } \text { A perpetual system allows a company to avoid conducting costly inventory } \\\text { counts. }\end{array} & \\\hline \text { A perpetual system is required by IFRS and ASPE. } & \\\hline\end{array}$$

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Definitions:

Units Transferred Out

Describes the quantity of goods that have completed the production process and are moved out of the work-in-process inventory into finished goods or to another process.

Units Started

The number of units of a product that have begun the production process within a specific period.

Cost Per Equivalent Unit

This measures the total cost of producing one unit of goods, considering both direct and indirect costs, and is used in processes where goods are indistinguishable from each other.

Work In Process Inventory

The value of partially completed goods which are still in the production process at a particular point in time.