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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Lost production time, scrap, and rework are examples of which type of cost in inventory accounting?

Selling expenses

Direct material costs

Normal costs

Abnormal costs

Previous problemNext problem

Verified step by step guidance

Understand the concept of abnormal costs: Abnormal costs in inventory accounting refer to costs that are not expected or typical in the production process. These include costs arising from inefficiencies such as lost production time, scrap, and rework.

Differentiate abnormal costs from normal costs: Normal costs are the expected costs incurred during production, such as direct materials, direct labor, and overhead. Abnormal costs, on the other hand, are unexpected and should not be included in the cost of inventory.

Recognize the impact of abnormal costs: Abnormal costs are typically treated as period costs and expensed in the income statement rather than being capitalized as part of inventory. This ensures that inventory reflects only the costs necessary to bring it to its current condition and location.

Review the other options: Selling expenses are costs related to marketing and selling the product, not production inefficiencies. Direct material costs are the costs of raw materials used in production, and normal costs are the expected costs of production. None of these align with the definition of abnormal costs.

Conclude that lost production time, scrap, and rework are examples of abnormal costs because they represent inefficiencies and unexpected costs in the production process.