Which of the Following Statements About the Computation of Cost

question 54

Multiple Choice

Which of the following statements about the computation of cost of goods sold is true?

• A) Manufacturing and retail businesses must use the specific identification method for tax purposes.
• B) Manufacturing and retail businesses must use the FIFO costing convention for tax purposes.
• C) Manufacturing and retail businesses must use the LIFO costing convention for tax purposes.
• D) Manufacturing and retail businesses that use the LIFO costing convention for tax purposes must also use LIFO for book purposes.

---

Definitions:

Time and Materials Pricing

A contract or pricing method where the customer pays the supplier based on the time spent to complete the work and the cost of materials used.

Production Capacity

The maximum amount of goods that can be produced in a given timeframe using available resources.

Contribution Margin

The amount by which sales revenue exceeds variable costs, used to cover fixed costs and generate profit.

Sales Mix

The composition of different products or services sold by a business, affecting overall sales volume, revenue, and profit margins.