Multiple Choice
Which inventory system provides a continuous record of inventory and cost of goods sold, updating these accounts after each purchase or sale?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following will be included in manufacturing overhead costs?
A
Direct materials used in production
B
Wages paid to assembly line workers
C
Sales commissions paid to sales staff
D
Factory utilities expense
Verified step by step guidance1
Understand the concept of manufacturing overhead: Manufacturing overhead includes all indirect costs associated with the production process that cannot be directly traced to specific units of product. Examples include factory utilities, depreciation on factory equipment, and salaries of factory supervisors.
Analyze each option provided in the problem: Direct materials used in production and wages paid to assembly line workers are direct costs, meaning they can be directly traced to the production of specific units. Sales commissions paid to sales staff are selling expenses, not manufacturing costs.
Identify the correct classification for factory utilities expense: Factory utilities expense is an indirect cost incurred during the production process. It is part of manufacturing overhead because it supports the production environment but cannot be directly traced to specific products.
Review the distinction between direct costs and indirect costs: Direct costs (e.g., direct materials and direct labor) are directly attributable to the production of goods, while indirect costs (e.g., factory utilities) are shared across the production process and fall under manufacturing overhead.
Conclude that factory utilities expense is the correct answer: Based on the definitions and classifications, factory utilities expense is included in manufacturing overhead costs.
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