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 is considered an inventory ordering cost under inventory management systems?

Costs of insuring inventory against loss or damage

Costs of inventory shrinkage due to theft or obsolescence

Costs of storing inventory in a warehouse

Costs incurred to place and receive purchase orders for inventory

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Verified step by step guidance

Understand the concept of inventory ordering costs: These are costs directly associated with placing and receiving purchase orders for inventory. They are part of the broader category of inventory management costs.

Differentiate inventory ordering costs from other inventory-related costs: Costs such as insuring inventory, shrinkage due to theft or obsolescence, and storage costs are not considered ordering costs. These fall under carrying costs or other categories.

Focus on the correct definition: Inventory ordering costs include activities like administrative expenses for processing purchase orders, communication costs with suppliers, and transportation costs for receiving inventory.

Relate the correct answer to the definition: The correct answer, 'Costs incurred to place and receive purchase orders for inventory,' aligns with the definition of inventory ordering costs.

Apply this understanding to similar questions: When analyzing inventory management systems, always categorize costs based on their nature—ordering costs, carrying costs, or other operational costs.