Operating costs incurred by a manufacturing company become either

(a) part of the cost of inventory to be expensed as cost of goods sold at the time the finished goods are sold or

(b) expenses at the time they are incurred. Indicate whether each of the following costs belongs in category

a. or b.

JCPenney Company, Inc., is a major retailer with department stores in all 50 states. The dominant portion of the company's business consists of providing merchandise and services to consumers through department stores that include catalog departments. In a recent annual report, JCPenney reported cost of goods sold of $10,969 million, ending inventory for the current year of $3,062 million, and ending inventory for the previous year of $2,969 million.
Required:
Is it possible to develop a reasonable estimate of the merchandise purchases for the year? If so, prepare the estimate; if not. explain why.

Transcribed Image Text:

1. Wages of factory workers 2. Sales salaries 3. Costs of raw materials purchased 4. Heat. light, and power for the factory building 5. Heat, light, and power for the headquarters office building a. Part of Inventory b. Expense as Incurred