If a Company, Operating in an Inflationary Environment, Uses FIFO

question 66

True/False

If a company, operating in an inflationary environment, uses FIFO for tax purposes and weighted-average for financial reporting purposes, this will result in a deferred tax asset.

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Definitions:

Predetermined Overhead

An estimated overhead cost determined before the period begins for the purpose of allocating overhead costs to products or services in a more consistent manner.

Direct Materials

Raw materials that can be directly traced to and are integral to the finished product.

Raw Materials

Basic substances in their natural, modified, or semi-processed states used as inputs for production.

Predetermined Overhead

An estimated rate used to assign overhead costs to products or services based on a planned amount of overhead and a planned allocation base.