Second Street Company Has 10 Units in Ending Merchandise Inventory

question 91

Multiple Choice

Second Street Company has 10 units in ending merchandise inventory on December 31.The units were purchased in November for $180 each.The price lists from suppliers indicate the current replacement cost of the item to be $174 each.Which of the following statements is TRUE of the effects of the adjustments to ending merchandise inventory and the cost of goods sold?

• A) The cost of goods sold would increase by $6.
• B) The cost of goods sold would not be affected.
• C) The cost of goods sold would decrease by $60.
• D) The cost of goods sold would increase by $60.

Grasp the concept of income elasticity of demand and its application in classifying goods as normal or inferior.

Apply knowledge of elasticity to predict changes in demand or consumption based on changes in the price of related goods or changes in income.

Recognize the economic implications of different elasticity measures (price, income, and cross-price) on consumer behavior and business strategy.

Analyze different scenarios to determine the elasticity type and its impact on quantity demanded.

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Definitions:

Unused Capacity

Represents resources or facilities available but not currently being utilized to their full potential in the production process.

Job-Order Costing

A cost accounting system in which costs are assigned to specific jobs or batches, useful in industries where products or services are customized.

Predetermined Overhead Rate

The estimated cost of manufacturing overhead for a specific reporting period, divided by an allocation base, like direct labor hours.

Capacity

The maximum level of output that a company can sustain to produce in a given period under normal conditions.