What Is the Internal Control Advantage of Using the Net

question 34

Multiple Choice

What is the internal control advantage of using the net method of accounting for merchandise purchases?

• A)It highlights the inefficiency of losing purchase discounts.
• B)It guarantees that all purchase discounts will be taken.
• C)It automatically increases a firm's cash balance.
• D)It results in a higher quality of inventory on hand for customers.

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Definitions:

Factory Overhead Cost

Indirect costs related to manufacturing that are not directly traceable to a product, including costs for maintenance, utilities, and indirect labor.

Managerial Accounting

The process of identifying, measuring, analyzing, and communicating financial information to managers for the pursuit of an organization's goals.

Product Costs

Costs that are directly associated with the creation of a product, including materials, labor, and overhead.

Direct Materials Cost

The expense associated with the raw materials directly used in the manufacture of a product.