Multiple Choice
To determine a product's selling price based on the total cost method, management should include:
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4. Merchandising Operations
Net Sales
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Standard costs are used in the calculation of which of the following?
A
Net Sales
B
Cost of Goods Sold
C
Accounts Receivable
D
Retained Earnings
Verified step by step guidance1
Understand the concept of standard costs: Standard costs are predetermined costs that serve as benchmarks for measuring performance. They are often used in manufacturing to estimate the cost of producing goods.
Identify the relationship between standard costs and Cost of Goods Sold (COGS): Standard costs are directly tied to the calculation of COGS because they represent the expected cost of producing goods, which is a key component in determining the cost of inventory sold during a period.
Eliminate irrelevant options: Net Sales, Accounts Receivable, and Retained Earnings are not directly calculated using standard costs. Net Sales refers to revenue after deductions, Accounts Receivable represents amounts owed by customers, and Retained Earnings reflect accumulated profits, none of which involve standard costs.
Focus on the correct option: Cost of Goods Sold is the correct answer because it is calculated using the costs associated with producing goods, including standard costs for materials, labor, and overhead.
Summarize the reasoning: Standard costs are used in the calculation of Cost of Goods Sold because they provide a consistent and efficient way to estimate production costs, which are essential for determining the value of inventory sold during a period.
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