Question

Which of the following will not be used to calculate the cost merchandise and is closed...

Which of the following will not be used to calculate the cost merchandise and is closed off to the profit & loss account:

(a) freight inwards

(b) purchases

(c) assembly cost of merchandise

(d) import duties

(e) freight outwards

And please explain , I am a little confused!! Thank you!!!

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Homework Answers

Answer #1

Answer is e:

Freight inwards refers to the cost of freight associated with the purchase of merchandise or other assets. This is added to the cost since it is required for bringing the material inwards.

Purchases will used to compute the cost of goods sold.

Assmbly cost of merchandise is added to the cost of goods sold since it is a direct cost attributed to the goods

Import duties refers to direct cost required for importing the goods/ material and is hence added to the cost of goods

Fright otwards is  transportation cost for delivery of goods from a supplier to its customers. It is a cost of selling and is not a direct cost related to purchases. It is thereby charged to expense account .

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