Multiple Choice
The materials price variance is the difference between the actual price of materials and which of the following?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Under both the perpetual and periodic inventory systems, the cost of materials a company purchases to use in making products are classified as:
A
Cost of goods sold
B
Raw materials inventory
C
Work in process inventory
D
Finished goods inventory
Verified step by step guidance1
Understand the classification of inventory under the perpetual and periodic inventory systems. Inventory is categorized into different types based on its stage in the production process: raw materials, work in process, and finished goods.
Raw materials inventory refers to the cost of materials purchased by a company that are yet to be used in production. These materials are stored until they are needed for manufacturing.
Work in process inventory represents the cost of products that are partially completed during the production process. This includes direct materials, direct labor, and allocated manufacturing overhead costs.
Finished goods inventory consists of completed products that are ready for sale but have not yet been sold to customers. These are the final output of the production process.
Under both perpetual and periodic inventory systems, the cost of materials purchased for production is initially classified as raw materials inventory. As production progresses, these costs are transferred to work in process inventory and eventually to finished goods inventory before being recognized as cost of goods sold upon sale.
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