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

Which of the following groups of costs is the most accurate example of variable costs in the context of calculating Cost of Goods Sold under both perpetual and periodic inventory systems?

Depreciation expense, administrative salaries, and office supplies

Interest expense, advertising, and research & development costs

Direct materials, direct labor, and sales commissions

Factory rent, insurance, and property taxes

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Verified step by step guidance

Understand the concept of variable costs: Variable costs are expenses that change in proportion to the level of production or sales activity. Examples include costs directly tied to production, such as direct materials and direct labor.

Review the components of Cost of Goods Sold (COGS): COGS typically includes direct costs associated with producing goods, such as direct materials and direct labor. These costs are variable because they fluctuate with production levels.

Analyze the options provided: Evaluate each group of costs to determine whether they are variable or fixed. Fixed costs, such as depreciation expense, factory rent, and property taxes, do not change with production levels, whereas variable costs like direct materials and direct labor do.

Focus on the correct answer: Direct materials, direct labor, and sales commissions are variable costs because they increase or decrease based on production or sales activity. These costs are directly tied to the production process and are included in COGS calculations under both perpetual and periodic inventory systems.

Relate the concept to inventory systems: Both perpetual and periodic inventory systems track COGS, but the method of tracking differs. Regardless of the system, variable costs like direct materials and direct labor are included in the calculation of COGS because they are directly tied to the production of goods.