The Essence of the Perpetual Method of Accounting for Inventory

question 11

Multiple Choice

The essence of the perpetual method of accounting for inventory is:

• A) it produces a higher gross profit than the periodic method.
• B) a stocktake is performed.
• C) cost of sales is calculated at the end of the accounting period.
• D) all movements in each item of stock are tracked via detailed inventory records.

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Definitions:

Marginal Revenue

The extra revenue earned from the sale of an additional unit of a product or service.

Maximize Profits

The process by which a firm adjusts its production and pricing strategies to earn the highest possible profit.

Economic Profits

Profits calculated by subtracting both the explicit and implicit costs of production from total revenues.

Monopolistically Competitive

Describes a market type where numerous sellers offer differentiated products, leading to competitive yet non-homogeneous markets.