The Specific Identification Method of Costing Inventories Is Used When

question 75

Multiple Choice

The specific identification method of costing inventories is used when the

• A) physical flow of units cannot be determined.
• B) company sells large quantities of relatively low cost homogeneous items.
• C) company sells large quantities of relatively low cost heterogeneous items.
• D) company sells a limited quantity of high-unit cost items.

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Definitions:

Adjusted Cost

The cost that has been modified for adjustments like discounts, returns, or additional charges to reflect the true cost of purchase or production.

Cost of Goods Sold

Costs directly linked to the manufacturing of goods a business sells, covering both the cost of materials and labor.

Overapplied Manufacturing Overhead

Overapplied manufacturing overhead occurs when the allocated manufacturing overhead costs are more than the actual overhead costs incurred.

Underapplied Manufacturing Overhead

The situation where the actual manufacturing overhead costs are higher than the overhead costs allocated to products.