Multiple Choice
Which of the following methods results in the Cost of Goods Sold (COGS) being updated continuously as each sale occurs?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following would be categorized as Cost of Goods Sold (COGS) when operating a taco truck?
A
Advertising expenses for promoting the taco truck
B
The monthly payment for the taco truck's insurance
C
The cost of tortillas, meat, and vegetables used to make tacos sold to customers
D
Wages paid to the cashier working at the truck
Verified step by step guidance1
Step 1: Understand the concept of Cost of Goods Sold (COGS). COGS refers to the direct costs incurred in producing goods that are sold to customers. These costs typically include raw materials and direct labor directly involved in production, but exclude indirect expenses like advertising or insurance.
Step 2: Analyze each option provided in the problem. Determine whether each expense is directly tied to the production of tacos sold to customers or if it is an indirect expense.
Step 3: Evaluate 'Advertising expenses for promoting the taco truck.' Advertising is an indirect expense aimed at promoting sales, not directly tied to the production of tacos. Therefore, it is not categorized as COGS.
Step 4: Evaluate 'The monthly payment for the taco truck's insurance.' Insurance is a fixed cost and an indirect expense, not directly tied to the production of tacos. Hence, it is not categorized as COGS.
Step 5: Evaluate 'The cost of tortillas, meat, and vegetables used to make tacos sold to customers.' These are direct costs of raw materials used in producing the tacos sold to customers, making them part of COGS. Similarly, wages paid to the cashier are indirect labor costs and not part of COGS.
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