Multiple Choice
Which of the following statements about cost of goods sold under perpetual and periodic inventory systems is FALSE?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which one of the following items is NOT considered a manufacturing cost under both perpetual and periodic inventory systems?
A
Sales commissions
B
Direct labor
C
Direct materials
D
Factory overhead
Verified step by step guidance1
Understand the definition of manufacturing costs: Manufacturing costs are the costs incurred to produce a product. These include direct materials, direct labor, and factory overhead.
Review the components of manufacturing costs: Direct materials are the raw materials used in production, direct labor refers to the wages of workers directly involved in production, and factory overhead includes indirect costs like utilities and maintenance for the production facility.
Analyze the given options: Sales commissions are costs associated with selling the product, not producing it. Therefore, they are classified as selling expenses, not manufacturing costs.
Differentiate between manufacturing and non-manufacturing costs: Non-manufacturing costs, such as sales commissions, are not included in the cost of goods manufactured or inventory valuation under either perpetual or periodic inventory systems.
Conclude that sales commissions are NOT considered a manufacturing cost under both perpetual and periodic inventory systems, as they are unrelated to the production process.
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