When Comparing the Difference Between an Upstream and Downstream Transfer

question 104

Multiple Choice

When comparing the difference between an upstream and downstream transfer of inventory, and using the initial value method, which of the following statements is true when there is a non-controlling interest?

• A) Income from subsidiary will be lower by the amount of the ending inventory profit multiplied by the non-controlling interest percentage for downstream transfers.
• B) Income from subsidiary will be higher by the amount of the ending inventory profit multiplied by the non-controlling interest percentage for downstream transfers.
• C) Income from subsidiary will be reduced for downstream ending inventory profit but not for upstream profit, before the effect of the non-controlling interest.
• D) Income from subsidiary will be reduced for upstream ending inventory profit but not for downstream profit, before the effect of the non-controlling interest.
• E) Income from subsidiary will be the same for upstream and downstream profit.

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Definitions:

Weighted Average Method

A cost accounting method that calculates the cost of goods sold and ending inventory based on the average cost of all goods available for sale.

Direct Labor

Direct labor refers to the work of employees directly involved in the production of goods or services, often considered variable costs.

Equivalent Units

A method used in managerial accounting to calculate the number of complete units that could have been produced given the total amount of materials and effort expended.

Production Period

The Production Period is the phase in a manufacturing process when resources are used to convert raw materials into finished products.