If a Company Uses the Periodic Inventory System to Cost

question 51

True/False

If a company uses the periodic inventory system to cost its inventory, the gross profit method is a method that can be used to check on theft when the actual inventory is taken by the company.

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Definitions:

Margin Of Safety

It represents the difference between actual or budgeted sales and the break-even point. It indicates how much sales can fall before a business incurs a loss.

Contribution Format

A specific income statement format that separates fixed costs from variable costs to compute contribution margin, which helps in decision-making.

Income Statement

A record presenting the financial performance of a corporation, including its revenue, expenses, and net earnings, over a designated period.

Break-Even Point

The level of sales at which total revenues equal total costs, resulting in no profit or loss for the business.