Question

Define merchandise inventory. What types of costs are included in the Merchandise inventory account? ( min 150-200 words)

Answer 1

Merchandise inventory- It is the finished goods that is available for sale to customers. It is the final product that is taken directly from the manufacturer or supplier by the wholesaler or retailer and sold to the end consumers. Merchandise inventory can be located in transit or in the warehouse or on the consignment. It is also called, "Inventory". It is the current asset and has a debit balance and shown in the balance sheet.

Costs that are included in the Merchandise inventory account- Are as following:

1. Cost of product- Direct labor, direct material, overheads
2. Transportation-In cost- Freight
3. Packaging cost- Cost of boxes and paper, product labeling.
4. Transit Insurance- This protects the goods from loss or damage in the transit.