Under the Perpetual Inventory System

question 132

Multiple Choice

Under the perpetual inventory system

• A)the cost of each item is recorded in the Merchandise Inventory account when it is purchased.
• B)when an inventory item is sold,its cost is transaferred to the Cost of Goods Sold account.
• C)the balance of the Merchandise Inventory account equals the cost of goods on hand.
• D)All of these choices.

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Definitions:

Machine-Hours

The total hours that machinery is operating during a specific period, often used for allocating manufacturing overhead costs.

Predetermined Overhead Rate

An estimated rate used to assign manufacturing overhead costs to individual units of production.

Machine-Hours

A measure of the amount of time machines are operated, used as a basis for allocating manufacturing overhead costs in production.

Variable Manufacturing Overhead

Refers to the costs that vary with the level of production output, including items such as indirect materials and electricity to run machinery.