Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

The average manufacturing overhead cost per unit usually varies from one period to the next because:

manufacturing overhead costs are always fixed and do not change with production levels

the cost of goods sold is calculated the same way under both perpetual and periodic inventory systems

the total manufacturing overhead cost is spread over a different number of units each period

direct material costs fluctuate more than overhead costs

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Verified step by step guidance

Understand the concept of manufacturing overhead costs: Manufacturing overhead includes all indirect costs associated with production, such as factory rent, utilities, and equipment depreciation. These costs are not directly tied to the production of specific units but are allocated across all units produced.

Recognize that manufacturing overhead costs can be fixed or variable. Fixed costs remain constant regardless of production levels, while variable costs change with production activity. However, the average manufacturing overhead cost per unit depends on how these costs are allocated across the total number of units produced.

Analyze the relationship between production levels and average overhead cost per unit: When production levels increase, the fixed portion of manufacturing overhead is spread across more units, reducing the average cost per unit. Conversely, when production levels decrease, the fixed costs are spread across fewer units, increasing the average cost per unit.

Understand why the total manufacturing overhead cost is spread over a different number of units each period: Production levels fluctuate due to factors such as demand, capacity, and operational efficiency. These fluctuations affect the number of units produced, which in turn impacts how the total overhead cost is allocated.

Conclude that the average manufacturing overhead cost per unit varies because the total manufacturing overhead cost is distributed across a changing number of units each period. This variability is a key characteristic of overhead allocation in manufacturing accounting.