IU A200 EXAM 2 QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026
Asset Write-Off - Answers An asset you have that no longer exists.
FOB Destination - Answers Seller owns inventory while traveling/Ownership transfers at destination:
Transportation-Out
FOB Shipping Point - Answers Buyer owns inventory once it leaves/Ownership transfers at shipping
point: Transportation-In
Perpetual Inventory System - Answers System under which the balance in the inventory account is
increased each time goods are purchased and decreased each time goods are sold. Constantly keeps
track of changes with inventory and costs of goods sold.
Product Cost - Answers a type of cost associated with goods or resale, usually inventory costs. this
type of cost is expensed in the period in which the inventory is sold.
Period Cost - Answers this type of cost is expensed in the period in which it is used.
Selling and Administrative Expenses - Answers also called period costs, these are costs that are not
directly traceable to products, for example, operating expenses.
Just-in-time Inventory - Answers business or factories located on shipping routes that receive
inventory when they are running low instead of having a warehouse for storage
Net Income Equation - Answers Sales - Cost of Goods Sold = Gross Profit - Selling/Administrative
Costs = Net Income
Gross Margin - Answers the difference between sales revenue and cost of goods sold
2/10 n/30 - Answers 2 percent discount if paid within 10 days, otherwise full amount must be payed
within 30 days
FIFO - Answers Goods first added to inventory are assumed to be first goods removed from inventory
for sale. During periods of inflation, this gives the lowest COGS and the highest net income.
LIFO - Answers Goods last added to inventory are assumed to be first goods removed from inventory
for sale. This is most often used by companies during periods of inflation as it gives the highest COGS
and lowest net income which is beneficial for tax purposes.
Shrinkage - Answers a term that reflects decreases in inventory for reasons other than sales to
customers
Sales Discounts - Answers price reductions offered by sellers to encourage buyers to pay promptly
Contribution Margin Income Statement - Answers Selling Price- Variable Cost = Contribution Margin -
Fixed Cost = Net Income
Variable Cost - Answers A cost which is constant per unit and changes in total based on activity level
Fixed Cost - Answers A cost which remains constant in total, regardless of activity level.
Break-Even Point - Answers When the level of sales equals zero
Total Costs - Answers Variable costs + fixed costs
Asset Write-Off - Answers An asset you have that no longer exists.
FOB Destination - Answers Seller owns inventory while traveling/Ownership transfers at destination:
Transportation-Out
FOB Shipping Point - Answers Buyer owns inventory once it leaves/Ownership transfers at shipping
point: Transportation-In
Perpetual Inventory System - Answers System under which the balance in the inventory account is
increased each time goods are purchased and decreased each time goods are sold. Constantly keeps
track of changes with inventory and costs of goods sold.
Product Cost - Answers a type of cost associated with goods or resale, usually inventory costs. this
type of cost is expensed in the period in which the inventory is sold.
Period Cost - Answers this type of cost is expensed in the period in which it is used.
Selling and Administrative Expenses - Answers also called period costs, these are costs that are not
directly traceable to products, for example, operating expenses.
Just-in-time Inventory - Answers business or factories located on shipping routes that receive
inventory when they are running low instead of having a warehouse for storage
Net Income Equation - Answers Sales - Cost of Goods Sold = Gross Profit - Selling/Administrative
Costs = Net Income
Gross Margin - Answers the difference between sales revenue and cost of goods sold
2/10 n/30 - Answers 2 percent discount if paid within 10 days, otherwise full amount must be payed
within 30 days
FIFO - Answers Goods first added to inventory are assumed to be first goods removed from inventory
for sale. During periods of inflation, this gives the lowest COGS and the highest net income.
LIFO - Answers Goods last added to inventory are assumed to be first goods removed from inventory
for sale. This is most often used by companies during periods of inflation as it gives the highest COGS
and lowest net income which is beneficial for tax purposes.
Shrinkage - Answers a term that reflects decreases in inventory for reasons other than sales to
customers
Sales Discounts - Answers price reductions offered by sellers to encourage buyers to pay promptly
Contribution Margin Income Statement - Answers Selling Price- Variable Cost = Contribution Margin -
Fixed Cost = Net Income
Variable Cost - Answers A cost which is constant per unit and changes in total based on activity level
Fixed Cost - Answers A cost which remains constant in total, regardless of activity level.
Break-Even Point - Answers When the level of sales equals zero
Total Costs - Answers Variable costs + fixed costs
