Identify the False Statement Regarding How Product Costs in a Manufacturing

question 126

Multiple Choice

Identify the false statement regarding how product costs in a manufacturing company differ from product costs in a service or merchandising company.

• A) Both manufacturing companies and service companies incur costs for supplies.
• B) Manufacturing companies accumulate product costs in inventory accounts, while service companies do not.
• C) Products of service companies such as restaurants are consumed immediately.
• D) Most labor costs for merchandising companies are treated as product costs.

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Definitions:

Weighted Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all items available for sale.

Equivalent Units

A concept used in cost accounting to express the amount of materials, labor, and overhead costs associated with partially completed goods as if they were finished.

Weaving Department

A specialized division in a manufacturing facility where threads are interlaced to make textiles or fabric.

Weighted Average Method

A cost accounting method that averages all costs of inventory available for sale during the period and assigns the average cost to both ending inventory and cost of goods sold.