Which of the Following Does Not Correctly Describe the FIFO

question 14

Multiple Choice

Which of the following does not correctly describe the FIFO costing method?

• A)This method assumes that the oldest inventory costs are the first costs recorded for cost of goods sold.
• B)This method assumes that most current inventory costs are the first costs recorded for cost of goods sold.
• C)This method approximates the physical flow of most types of goods.
• D)This method is permitted under private entity GAAP

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Definitions:

Absolute Advantage

The ability of an entity to produce a good or service more efficiently than its competitors with the same amount of resources.

Resources

Assets, materials, and inputs used to produce goods and services, including time, labor, capital, and natural resources.

Production

The process of creating, growing, manufacturing, or improving goods and services.

Production Possibility Curve

A graphical representation showing the maximum combination of goods and services that can be produced with a given set of resources and technology.