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 number of units produced does not affect net operating income when using which of the following inventory costing methods?

LIFO under perpetual inventory

Variable costing

FIFO under periodic inventory

Absorption costing

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Verified step by step guidance

Understand the concept of inventory costing methods: Inventory costing methods determine how costs are assigned to inventory and cost of goods sold. Common methods include Variable Costing, Absorption Costing, FIFO (First-In, First-Out), and LIFO (Last-In, First-Out).

Learn about Variable Costing: Under Variable Costing, only variable production costs (direct materials, direct labor, and variable manufacturing overhead) are included in product costs. Fixed manufacturing overhead is treated as a period expense and does not affect the cost of inventory.

Analyze the impact of production levels on net operating income under Variable Costing: Since fixed manufacturing overhead is expensed in the period incurred, the number of units produced does not affect net operating income. Net operating income is driven by sales volume rather than production volume.

Compare Variable Costing with Absorption Costing: Absorption Costing includes both variable and fixed manufacturing overhead in product costs. This means that changes in production levels can affect net operating income because fixed overhead costs are allocated to inventory and expensed when sold.

Conclude why Variable Costing is the correct answer: Under Variable Costing, net operating income is unaffected by the number of units produced because fixed costs are not allocated to inventory. This is different from Absorption Costing, FIFO, and LIFO methods, where production levels can influence net operating income.