Multiple Choice
In the context of inventory accounting, what does the sum of beginning inventory and net purchases represent?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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A cost that changes in total in proportion to changes in volume of activity is a(n):
A
Fixed cost
B
Variable cost
C
Sunk cost
D
Mixed cost
Verified step by step guidance1
Understand the definition of each type of cost mentioned in the problem: Fixed cost, Variable cost, Sunk cost, and Mixed cost.
Fixed cost: This is a cost that remains constant in total regardless of changes in the volume of activity. Examples include rent or salaries.
Variable cost: This is a cost that changes in total directly in proportion to changes in the volume of activity. Examples include raw materials or direct labor costs.
Sunk cost: This is a cost that has already been incurred and cannot be recovered, regardless of future activity levels. Examples include past investments in equipment.
Mixed cost: This is a cost that contains both fixed and variable components. Examples include utility bills where there is a base charge plus a variable charge based on usage.
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Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory practice set
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