The Primary Basis of Accounting for Inventories Is Cost

question 20

Multiple Choice

The primary basis of accounting for inventories is cost.A departure from the cost basis of pricing the inventory is required where there is evidence that when the goods are sold in the ordinary course of business their

• A)selling price will be less than their replacement cost.
• B)replacement cost will be more than their net realizable value.
• C)cost will be less than their replacement cost.
• D)future utility will be less than their cost.

---

Definitions:

Prestige Pricing

Psychological pricing strategy used with goods whose quality is difficult to determine by inspection or for products about which consumers have little solid information.

Price Skimming

Setting the price of a new product higher than expected to recover development costs.

Penetration Pricing

Setting the price of a new product lower than expected to gain fast market share.

Development Costs

Development costs are expenses associated with the creation and design of new products or services, including research and development.