Multiple Choice
Which inventory system provides a continuous record of inventory and cost of goods sold, updating these accounts after each purchase or sale?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following costs are most likely to be controllable at the production supervisor level in relation to Cost of Goods Sold under a perpetual or periodic inventory system?
A
Depreciation expense on factory equipment
B
Property taxes on the manufacturing facility
C
Raw material purchase price
D
Direct labor costs
Verified step by step guidance1
Understand the concept of controllable costs: Controllable costs are those that a manager or supervisor can influence or change within their scope of authority. In this case, the production supervisor has control over certain costs related to the production process.
Analyze each cost item provided in the question: Depreciation expense on factory equipment and property taxes on the manufacturing facility are fixed costs and typically not controllable by the production supervisor, as these are determined by external factors or long-term decisions.
Consider the raw material purchase price: While raw material costs are variable, they are usually negotiated by procurement or purchasing departments, not the production supervisor. Therefore, this cost is not directly controllable at the production supervisor level.
Focus on direct labor costs: Direct labor costs are associated with the wages paid to workers directly involved in the production process. The production supervisor can influence these costs by managing work schedules, overtime, and productivity, making them controllable at this level.
Conclude that direct labor costs are the most likely to be controllable by the production supervisor in relation to Cost of Goods Sold under both perpetual and periodic inventory systems.
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