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

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Which costing method(s) provide cost information that is helpful to management in setting prices?

Both absorption costing and variable costing

Only absorption costing

Only variable costing

Neither absorption costing nor variable costing

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Verified step by step guidance

Understand the concept of absorption costing: Absorption costing includes all manufacturing costs (both fixed and variable) in the cost of a product. This method provides a comprehensive view of product costs, which can be helpful for long-term pricing strategies and financial reporting.

Understand the concept of variable costing: Variable costing includes only variable manufacturing costs in the cost of a product. Fixed manufacturing costs are treated as period costs. This method is useful for short-term decision-making and analyzing the impact of changes in production levels on profitability.

Compare the two methods: Absorption costing is more suitable for external reporting and long-term pricing decisions, while variable costing is better for internal decision-making and understanding the contribution margin of a product.

Evaluate the usefulness of both methods: Management can use absorption costing to ensure all costs are covered in pricing decisions, while variable costing helps in setting prices based on incremental costs and contribution margin analysis.

Conclude that both absorption costing and variable costing provide valuable cost information for management in setting prices, depending on the specific decision-making context and goals.