1. How does the Cost of Goods Sold section of the income statement differ betwee
ID: 2476513 • Letter: 1
Question
1. How does the Cost of Goods Sold section of the income statement differ between merchandising and manufacturing companies?
EX.18-5; CONCEPTS AND TERMINOLOGY;
a. Advertising cost are usually viewed as (period, product) costs;
b. feedback is often used to (improve, direct) operations;
c. Payments of cash or the commitment to pay cash in the future for the purpose of generating revenues are (costs, expenses);
d. A product, sales territory, department, or activity to which costs are traced is called a (direct cost, cost object);
e. The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory);
f. Factory overhead costs combined with direct labor costs are (prime, conversion) costs;
g. The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor compound of product costs;
Explanation / Answer
1. How does the Cost of Goods Sold section of the income statement differ between merchandising and manufacturing companies?
Answer : The Cost of Goods Sold section of the income statement of a Merchandising company is constitutes the finished goods procured from third party. The Cost of Goods Sold section of the income statement of a manufacturing company represents cost in inhouse to produce Finished goods. The Cost of Goods Sold section of the income statement of a Merchandising company is segregation of expenses into Direct Material, Direct Labor and Factory Overhead is not known, wheras in a manufacturing company is the composition of Cost of Goods Sold section into Direct Material, Direct Labor and Factory Overhead is well known.
EX.18-5; CONCEPTS AND TERMINOLOGY;
a. Advertising cost are usually viewed as period costs;
b. feedback is often used to improve operations;
c. Payments of cash or the commitment to pay cash in the future for the purpose of generating revenues are expenses.
d. A product, sales territory, department, or activity to which costs are traced is called a direct cost.
e. The balance sheet of a manufacturer would include an account for work in process inventory.
f. Factory overhead costs combined with direct labor costs are conversion costs;
g. The implementation of automatic, robotic factory equipment normally decreases the direct labor compound of product costs.
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