Multiple Choice
Which of the following is NOT a key difference between the calculation of Cost of Goods Sold (COGS) under the perpetual inventory system and the periodic inventory system?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following is an element of inventory holding costs?
A
Sales commissions
B
Freight-in costs
C
Purchase discounts
D
Storage costs
Verified step by step guidance1
Understand the concept of inventory holding costs: These are costs incurred to store and manage inventory until it is sold. They typically include expenses related to warehousing, insurance, depreciation, and obsolescence.
Analyze each option provided in the problem: Sales commissions, freight-in costs, purchase discounts, and storage costs.
Evaluate sales commissions: These are costs paid to sales personnel for selling products and are not related to holding inventory. Therefore, they are not inventory holding costs.
Evaluate freight-in costs: These are costs incurred to transport goods to the warehouse. While they are part of the cost of acquiring inventory, they are not considered holding costs because they occur before the inventory is stored.
Evaluate storage costs: These are directly related to holding inventory, as they represent the expenses of warehousing and maintaining inventory. Therefore, storage costs are an element of inventory holding costs.
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