The Hometown Hardware store sells hardware supplies. Included in the inventory are boards, nails, screws, and tools. These items were purchased throughout the year at differing prices. The owner assigns an average cost to each item in inventory. What type of inventory control method does the Hometown Hardware use?

INTRODUCTION TO COST ACCOUNTING

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	Special Identification
B	Last In, First Out
C	Weighted Average
D	First In, First Out

Explanation:

Detailed explanation-1: -When you sell products in a perpetual inventory system, the expense account increases and grows the costs of sales. Also called the cost of goods sold (COGS), the costs of sales are the direct expenses from the production of goods during a period.

Detailed explanation-2: -Which inventory system recognizes cost of goods sold and decreases inventory each time a sale occurs? Perpetual inventory system.

Detailed explanation-3: -Answer and Explanation: LIFO (Last In Last Out) method shows the lowest net income due to the highest cost of goods sold. In the LIFO method, the cost of goods sold is the highest compared to the other methods of inventory valuation.

Detailed explanation-4: -Answer: C) Under FIFO, the ending inventory is based on the latest units purchased. Explanation: FIFO is an acronym for First In, First Out. Under this inventory valuation method, the goods which were purchased earliest are sold first.

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