Final answer:
The question pertains to inventory costing methods that affect COGS on an income statement: Weighted Average Cost, Specific Identification Cost, FIFO, and LIFO. Moreover, analyzing a firm's cost structure involves calculating various cost measures, including average total cost.
Step-by-step explanation:
The question asks about the usual format for reporting product and period costs for the Cost of Goods Sold (COGS) within an income statement.
Different Inventory Costing Methods
There are various methods to determine the cost of inventory that can affect the calculation of COGS, including:
- Weighted Average Cost: This method takes the total cost of goods available for sale and divides it by the number of units available for sale, providing a weighted average unit cost.
- Specific Identification Cost: This method tracks the actual cost of specific items sold and is often used for unique or high-value items.
- First-In-First-Out (FIFO) Cost: This assumes that the oldest inventory costs are recorded as the first to be sold.
- Last-In-First-Out (LIFO) Cost: This method assumes that the most recently purchased or produced inventory is sold first.
Cost Structure Analysis
To analyze a firm's cost structure, you can calculate total cost, average variable cost, average total cost, and marginal cost. The average total cost is calculated by dividing the total cost by the total output at each level of output, usually forming a U-shaped curve on a graph. Average costs lower than the market price suggest that the firm will be earning profits.