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 conditions would cause the break-even point to decrease in a company using either the perpetual or periodic inventory system?

An increase in total fixed costs

An increase in variable costs per unit

An increase in the selling price per unit

A decrease in the number of units sold

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Verified step by step guidance

Understand the concept of break-even point: The break-even point is the level of sales at which total revenues equal total costs, resulting in no profit or loss. It is calculated using the formula: \( \text{Break-even point (units)} = \frac{\text{Total Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}} \).

Analyze the impact of an increase in total fixed costs: If total fixed costs increase, the numerator in the formula increases, which raises the break-even point. This means the company needs to sell more units to cover the higher fixed costs.

Examine the effect of an increase in variable costs per unit: If variable costs per unit increase, the denominator \( \text{Selling Price per Unit} - \text{Variable Cost per Unit} \) decreases, which also raises the break-even point. The company would need to sell more units to cover the higher variable costs.

Evaluate the impact of an increase in the selling price per unit: If the selling price per unit increases, the denominator \( \text{Selling Price per Unit} - \text{Variable Cost per Unit} \) increases, which lowers the break-even point. The company can sell fewer units to reach the break-even point because each unit contributes more to covering fixed costs.

Consider the effect of a decrease in the number of units sold: A decrease in the number of units sold does not directly affect the break-even point calculation, as the break-even point is a theoretical threshold rather than an actual sales figure. However, selling fewer units could impact profitability if the company fails to reach the break-even point.