Multiple Choice
In the context of inventory accounting, labor costs charged to manufacturing overhead represent which type of labor costs?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which of the following is an element of inventory holding costs?
A
Storage costs
B
Depreciation on office equipment
C
Sales commissions
D
Advertising expenses
Verified step by step guidance1
Understand the concept of inventory holding costs: These are costs incurred to store and maintain inventory until it is sold. They typically include expenses directly related to the storage and management of inventory.
Analyze each option provided in the question: Storage costs, depreciation on office equipment, sales commissions, and advertising expenses.
Evaluate 'Storage costs': This is a direct cost associated with holding inventory, such as warehouse rent, utilities, and security. It is a key element of inventory holding costs.
Evaluate 'Depreciation on office equipment': This is unrelated to inventory holding costs as it pertains to the wear and tear of office equipment, not inventory storage.
Evaluate 'Sales commissions' and 'Advertising expenses': Both are selling expenses and are not related to the costs of holding inventory. They are incurred to promote and sell products, not to store them.
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