Explanation

Factory manager's salary is manufacturing overhead.

An indirect cost not directly related to producing a specific unit.

Including salaries of supervisors, quality control, and support staff.

Explanation

A company can reduce its COGS by reducing direct material costs.

Such as negotiating better prices with suppliers, improving manufacturing efficiency, or finding alternative materials.

Explanation

A high COGS means that a company is spending a significant amount on producing or purchasing the goods they sell, which leaves less room for profit.

This can be a sign that the company's pricing strategy is not optimal.

They may need to consider price increases or cost reductions to maintain profitability.

Explanation

Direct labor is a cost associated with the production process.

It is typically included in the COGS of a manufacturing company.

However, a retail company does not produce goods, so direct labor is not a cost they incur.

Explanation

COGS (Cost of Goods Sold) directly affects profitability by reducing revenue and influencing gross profit margin.

A lower COGS indicates higher profitability, while a higher COGS reduces profitability.

This making it a key metric for evaluating a company's financial health.

Explanation

• Factory rent is an indirect cost, as it is not directly related to the production process.

Direct costs included in COGS are:

• Direct materials
• Direct labor
• Manufacturing supplies

Explanation

The Periodic inventory system requires a physical count of inventory to determine COGS.

As inventory levels are not continuously tracked.

A physical count is necessary to calculate COGS and update inventory records.

Explanation

Decreasing ending inventory means that more inventory has been sold, which increases the Cost of Goods Sold (COGS).

As a result, COGS increases, and gross profit decreases.

This is because the cost of the inventory that has been sold is transferred from inventory to COGS.

Explanation

An increase in beginning inventory decreases COGS.

As more inventory is already on hand and less needs to be purchased or produced.

This reduces the cost of goods sold, as the cost of the existing inventory is not included in COGS.

Explanation

Direct labor is a variable cost, meaning it changes in direct proportion to changes in production volume.

It is a cost directly related to the production process and is included in COGS.