In Determining the Cost of Goods Manufactured and Thus the Cost

question 67

Multiple Choice

In determining the cost of goods manufactured and thus the cost of the ending inventory:

• A)A production supervisor's salary must be treated as a period cost (not added to production costs and inventory) because the salary is paid regardless of the amount produced.
• B)The personnel department participates in hiring production workers, and therefore a portion of its costs must be allocated to production.
• C)Property taxes on the factory building are treated as period costs because the same taxes are due regardless of the volume of production.
• D)Only the costs of direct materials and direct labor must be capitalized.
• E)None of the above is correct.

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Definitions:

Free Cash Flow

The amount of cash generated by a company after accounting for capital expenditures, available for distribution among shareholders, debt repayment, or reinvestment.

Proxy-Imperfect

A substitute measure used in analysis or calculation that does not accurately represent the intended variable.

Fundamental Valuation

The process of determining the intrinsic value of a security, based on economic and financial analysis.

Accounting Measures

Quantitative financial information derived from an entity's accounting records, used to analyze its financial position, performance, and cash flows.