Multiple Choice
Which of the following costs can generally be traced directly to units of product under both perpetual and periodic inventory systems?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
If 9 pints of ice cream are purchased for \$54 and all are sold during the period, what is the cost of goods sold (COGS) under both the perpetual and periodic inventory systems?
A
\$54 under perpetual, \$0 under periodic
B
\$6 under both systems
C
\$0 under perpetual, \$54 under periodic
D
\$54 under both systems
Verified step by step guidance1
Understand the concept of Cost of Goods Sold (COGS): COGS represents the direct costs of producing or purchasing the goods that are sold during a specific period. It includes the purchase price of the goods and any additional costs directly related to the acquisition of the goods.
Identify the key details in the problem: 9 pints of ice cream were purchased for \$54, and all of them were sold during the period. This means the entire inventory was sold, and there is no remaining inventory at the end of the period.
Understand the difference between perpetual and periodic inventory systems: In the perpetual system, inventory and COGS are updated continuously with each purchase and sale. In the periodic system, inventory and COGS are updated at the end of the accounting period based on a physical count.
Calculate COGS under the perpetual system: Since all 9 pints were sold, the COGS is equal to the purchase cost of the 9 pints, which is \$54. This is because the perpetual system records the cost of each sale as it occurs.
Calculate COGS under the periodic system: At the end of the period, the total cost of goods sold is determined by subtracting the ending inventory (which is \$0 since all items were sold) from the cost of goods available for sale (\$54). Therefore, the COGS is also \$54 under the periodic system.
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