When Purchases of Merchandise Are Made on Account with a Perpetual

question 47

Multiple Choice

When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?

• A) debit Accounts Payable; credit Merchandise Inventory
• B) debit Merchandise Inventory; credit Accounts Payable
• C) debit Merchandise Inventory; credit Cash Discounts
• D) debit Merchandise Inventory; credit Purchases

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Definitions:

Efficiency Variance

The difference between the actual amount of input (time, materials, etc.) used in production and the standard amount expected to be used.

Direct Labor-Hours

The sum of the hours spent by workers directly manufacturing a product.

Variable Overhead

Indirect production costs that fluctuate with the level of output, such as utilities or materials used in the manufacturing process.

Efficiency Variance

A measure used in cost accounting to evaluate the efficiency of resource usage, calculated as the difference between actual usage and the standard or expected usage.