In a Perpetual Inventory System,the Flow of Inventory Cost Is

question 53

Multiple Choice

In a perpetual inventory system,the flow of inventory cost is:

• A)First through the income statement,then through the balance sheet.
• B)First through the balance sheet,then through the income statement.
• C)Only through the balance sheet and not the income statement.
• D)Only through the income statement and not the balance sheet.

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Definitions:

Degree of Operating Leverage

A financial metric that measures the sensitivity of a company's operating income to its sales volume.

Margin of Safety

The amount by which sales can drop before reaching the break-even point, typically expressed as a percentage of current sales.

Sales

The total revenue generated from goods or services sold by a company.

Net Operating Income

Revenue derived from the principal activities of a business before interest and taxes are subtracted.