BUSINESS ADMINISTRATION
BUSINESS MATHEMATICS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
LIFO
|
|
|
FIFO
|
|
|
average cost method
|
|
|
whichever cost method which produces the highest ending inventory figure
|
Detailed explanation-1: -Answer and Explanation: The inventory method that results in a cost of ending inventory that is close to the current cost of replacing the inventory is the FIFO method.
Detailed explanation-2: -The First-in, First-out (FIFO) inventory method results in Cost of goods sold valued at the most recent cost. 9. The matching principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.
Detailed explanation-3: -(a) First-in, First-out (FIFO): Under FIFO, the cost of goods sold is based upon the cost of material bought earliest in the period, while the cost of inventory is based upon the cost of material bought later in the year. This results in inventory being valued close to current replacement cost.
Detailed explanation-4: -The average cost method takes the weighted average of all units available for sale during the accounting period and then uses that average cost to determine the value of COGS and ending inventory.