Which of the Following Statements About the FIFO Cost Assumption

question 48

Multiple Choice

Which of the following statements about the FIFO cost assumption is true?

• A)The same costs per unit are assigned to the ending inventory and the cost of goods sold.
• B)Companies prefer to use FIFO because it lowers their tax liability.
• C)In times of rising prices FIFO will produce a higher net income than moving average.
• D)In time of rising prices FIFO produces an inventory cost per unit that is lower than the cost per unit of cost of goods sold.

Assess the financial viability of accepting special orders or further processing decisions.

Apply the total cost and sales price methods to pricing decisions.

Understand the concept of incremental analysis and its application in making business decisions.

Analyze various cost components (direct materials, direct labor, overhead) in manufacturing decisions.

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Definitions:

Dependent

An individual, typically a child or family member, whose maintenance and support can be claimed as a deduction by another, usually for tax purposes.

Head of Household

A tax filing status for individuals who are unmarried or considered unmarried, provide more than half of the household expenses, and have a qualifying person living with them.

Qualifying Child

A dependent who meets specific IRS criteria relating to relationship, age, support, and residence for tax purposes.

Keeping Up the Household

Refers to expenses incurred in maintaining a home, which, under certain conditions, might be deductible or relevant for tax credits.