MGMT 200 CH6 Inventory and Cost of Goods Sold ||
WITH COMPLETE ANSWERS.
Inventory correct answers Includes items a company intends for sale to customers in the
ordinary course of business (includes items that are not yet finished products - reported as a
CURRENT ASSET in the balance sheet)
- the amount the company reports is the cost of inventory NOT YET SOLD (at the end of the
period)
Cost of Goods Sold correct answers The cost of the inventory sold (reported as an expense in
the income statement)
Manufacturing Companies correct answers Produce the inventories they sell, rather than
buying them in finished form from suppliers (buy inputs for the products they manufacture)
Raw Materials correct answers Inventory includes the cost of components that will become
part of the finished product but have not yet been used in production
Work-in-process correct answers Inventory refers to the products that have been started in the
production process but are not yet complete at the end of the period
Overhead correct answers The total costs include raw materials, direct labor, and indirect
manufacturing costs
Finished Goods correct answers Inventory consists of items for which the manufacturing
process is complete
Merchandising Companies correct answers May assemble, sort, repackage, redistribute, store,
refrigerate, deliver, or install the inventory, but they do not manufacture it (they serve as
intermediaries in the process of moving inventory from the manufacturer to the end user)
Wholesalers correct answers Resell inventory to retail companies or to professional users
Retailers correct answers Purchase inventory from manufacturers or wholesalers and then sell
this inventory to end users
Multiple-step Income Statement correct answers Shows multiple levels of income (or profit)
Separates revenues and expenses into their different types, investors and creditors are better
able to determine the source of a company's profitability
Gross Profit correct answers First section of Multiple-step Income Statement
= Sales Revenue or Service Revenue - Cost of Goods Sold
Operating Income correct answers = Gross Profit - Operating Expenses (selling, general, and
administrative expenses)
WITH COMPLETE ANSWERS.
Inventory correct answers Includes items a company intends for sale to customers in the
ordinary course of business (includes items that are not yet finished products - reported as a
CURRENT ASSET in the balance sheet)
- the amount the company reports is the cost of inventory NOT YET SOLD (at the end of the
period)
Cost of Goods Sold correct answers The cost of the inventory sold (reported as an expense in
the income statement)
Manufacturing Companies correct answers Produce the inventories they sell, rather than
buying them in finished form from suppliers (buy inputs for the products they manufacture)
Raw Materials correct answers Inventory includes the cost of components that will become
part of the finished product but have not yet been used in production
Work-in-process correct answers Inventory refers to the products that have been started in the
production process but are not yet complete at the end of the period
Overhead correct answers The total costs include raw materials, direct labor, and indirect
manufacturing costs
Finished Goods correct answers Inventory consists of items for which the manufacturing
process is complete
Merchandising Companies correct answers May assemble, sort, repackage, redistribute, store,
refrigerate, deliver, or install the inventory, but they do not manufacture it (they serve as
intermediaries in the process of moving inventory from the manufacturer to the end user)
Wholesalers correct answers Resell inventory to retail companies or to professional users
Retailers correct answers Purchase inventory from manufacturers or wholesalers and then sell
this inventory to end users
Multiple-step Income Statement correct answers Shows multiple levels of income (or profit)
Separates revenues and expenses into their different types, investors and creditors are better
able to determine the source of a company's profitability
Gross Profit correct answers First section of Multiple-step Income Statement
= Sales Revenue or Service Revenue - Cost of Goods Sold
Operating Income correct answers = Gross Profit - Operating Expenses (selling, general, and
administrative expenses)
