Identify the correct statement with respect to manufacturing and merchandising companies in general and how their accounting systems differ.

A. Merchandising companies transform materials into other goods through the use of labor and factory facilities. Manufacturing companies sell goods without changing their basic forms. Manufacturing companies show inventories at the cost they pay to acquire them. Merchandising companies classify production costs as either direct material, direct labor, or indirect production costs, and they use the accounting system to determine how much cost of each type should be assigned to product inventories.

B. Manufacturing is the transformation of materials into other goods through the use of labor and factory facilities. Merchandising is the transformation of materials into other goods using outside vendors. Both companies classify production costs as either direct material, direct labor, or indirect production costs, and they use the accounting system to determine how much cost of each type should be assigned to product inventories.

C. Manufacturing is the sale of goods purchased at wholesale prices. Merchandising is the production of goods using raw materials purchased at resale prices. Both companies show inventories at the cost they pay to acquire them.

D. Manufacturing is the transformation of materials into other goods through the use of labor and factory facilities. Merchandising companies sell goods without changing their basic forms. Merchandising companies show inventories at the cost they pay to acquire them. Manufacturing companies classify production costs as either direct material, direct labor, or indirect production costs, and they use the accounting system to determine how much cost of each type should be assigned to product inventories.