Multiple Choice
Which type of budget is continually revised as time passes to reflect actual results and updated forecasts?
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3. Accrual Accounting Concepts
Introduction to Adjusting Journal Entries and Prepaid Expenses
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
In the single-period inventory model, the overage cost is:
A
The total cost of all inventory held at the end of the period.
B
The cost incurred for ordering or producing one unit more than the actual demand.
C
The cost of purchasing inventory at a discounted rate.
D
The cost of not having enough inventory to meet demand.
Verified step by step guidance1
Understand the concept of overage cost in the single-period inventory model. Overage cost refers to the cost incurred when you order or produce more inventory than the actual demand. This cost typically includes storage costs, disposal costs, or any other costs associated with excess inventory.
Review the options provided in the problem. The goal is to identify the correct definition of overage cost based on the single-period inventory model.
Option 1: 'The total cost of all inventory held at the end of the period' is incorrect because it does not specifically address the cost of excess inventory beyond demand.
Option 3: 'The cost of purchasing inventory at a discounted rate' is unrelated to overage cost, as it pertains to purchasing discounts rather than excess inventory.
Option 4: 'The cost of not having enough inventory to meet demand' describes shortage cost, not overage cost. Therefore, the correct answer is Option 2: 'The cost incurred for ordering or producing one unit more than the actual demand.'
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