Multiple Choice
Which of the following is a key difference between the perpetual and periodic inventory systems in determining Cost of Goods Sold (COGS)?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which costing method assigns only manufacturing costs to products?
A
Absorption costing
B
Job order costing
C
Activity-based costing
D
Variable costing
Verified step by step guidance1
Understand the concept of costing methods: Costing methods are approaches used to allocate costs to products or services. Each method has specific rules for assigning costs, particularly manufacturing and non-manufacturing costs.
Review the definition of Variable Costing: Variable costing is a method where only variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) are assigned to products. Fixed manufacturing overhead is treated as a period cost and not included in product costs.
Compare Variable Costing with Absorption Costing: Absorption costing includes both variable and fixed manufacturing costs in the cost of products. This is different from variable costing, which excludes fixed manufacturing overhead from product costs.
Analyze Job Order Costing and Activity-Based Costing: Job order costing assigns costs based on specific jobs or orders, and activity-based costing allocates costs based on activities that drive costs. Neither of these methods exclusively assigns only manufacturing costs to products.
Conclude why Variable Costing is the correct answer: Variable costing is unique in that it assigns only manufacturing costs (specifically variable costs) to products, making it the correct answer to the question.
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