ECONOMICS

COST ACCOUNTING

COST MANAGEMENT SYSTEMS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Identify the four types of cost adjustments.
A
A change to a requisition after the purchase order has been created will create a cost adjustment.
B
A standard cost update will create an inventory value adjustment.
C
Authorized users can manually create cost adjustments.
D
When a supplier invoice is processed in accounts payable, it can cause an adjustment to the inventory value and the cost of goods sold if the amounts processed for payment are different from the estimated amount on the purchase order.
E
A retroactive purchase order price adjustment can cause an adjustment to the inventory value and the cost of goods sold.
Explanation: 

Detailed explanation-1: -A cost adjustment is used when: the cost of a product has changed (a credit, rebate, or an extra charge for the products), but is indicated on a separate purchase invoice. freight or other charges are incurred and need to be added to the value of the inventory (rather than being expensed separately).

Detailed explanation-2: -Cost accounting is a form of managerial accounting that aims to capture a company’s total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as a lease expense. Cost accounting is not GAAP-compliant, and can only be used for internal purposes.

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