Vincent Company Uses the Perpetual Inventory Method

question 53

Multiple Choice

Vincent Company uses the perpetual inventory method. Vincent purchased 400 units of inventory that cost $5.00 each. At a later date the company purchased an additional 800 units of inventory that cost $6.00 each. Vincent sold 500 units of inventory for $9.00. If Vincent uses a FIFO cost flow method, the amount of cost of goods sold appearing on the income statement will be:

• A)$1,900.
• B)$2,000.
• C)$1,500.
• D)$2,600.

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Definitions:

Manufacturing Overhead Cost

The indirect costs associated with manufacturing, including expenses related to the operation of the factory like utilities and rent.

Conversion Cost

Direct labor cost plus manufacturing overhead cost.

Equivalent Unit

A measure used in cost accounting to express the amount of work done on a product in terms of fully completed units.

Weighted-Average Method

A process costing method that calculates unit costs by combining costs and outputs from the current and prior periods.