Question

Difference(s) in a merchandising concern's budget compared to a manufacturing firm is (are):

1.Merchandising concerns have period cost only.

2.The cost of goods sold for a merchandising concern is based on fixed costs only.

3.The cost of goods sold for a merchandising concern is based on variable costs only.

4.Manufacturing firms have product costs only.

Answer 1

Option (3) is correct. The cost of goods sold for a merchandising concern is based on variable costs only. For a merchandising concern, cost of goods sold is the cost of finished products purchased from the supplier and other costs in bringing the goods.

Option (1) is incorrect. Merchandising concerns have both product and period cost.

Option (2) is incorrect. The cost of goods sold for a merchandising concern is not based on fixed costs but based on variable costs only.

Option (4) is incorrect. Manufacturing firms have both product and period costs.

Answer is 3. The cost of goods sold for a merchandising concern is based on variable costs only.

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