The Merchandise Inventory account includes costs related to purchased goods, shipping and handling fees, transit insurance, and storage expenses.
Explanation:
Merchandise inventory consists of finished goods available for resale to consumers.
It encompasses all items that a company owns and intends to sell.
A merchandise enterprise:
- Generates net income by purchasing and selling merchandise
- Can acquire products from manufacturers to sell to retailers
- May also buy from manufacturers and sell directly to end-users
- Can operate as either a wholesaler or a retailer
Classified as a current asset, the Merchandise Inventory is vital for tracking.
The Merchandise Inventory account includes costs associated with purchases, shipping fees, preparation costs and handling expenses.
Answer:
the absorption costing net operating income from the previous year was $41,200
Explanation:
The Absorption Costing Net Operating Income for the last year is calculated by reconciling the Variable Costing Income to the Absorption Costing Income.
Calculation of Absorption Costing Net Operating Income
Variable Costing Income $52,400
Less Decrease in Inventory ( 1,400 × $8) ($11,200)
Absorption Costing Net Operating Income $41,200
Absorption Costing Net Operating Income will be lower than Variable Costing Income.
