A Company Just Starting Business Made the Following Four Inventory

question 48

Multiple Choice

A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. The inventory method which results in the highest gross profit for June is

• A)the FIFO method.
• B)the LIFO method.
• C)the weighted average unit cost method.
• D)not determinable.

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Definitions:

Raw Material

Basic materials used in the production process to manufacture finished goods, essential components of production cost.

Cost of Goods Sold

Direct expenditures involved in the manufacture of products a business sells, such as labor and materials.

Fixed Overhead Variances

The difference between actual fixed overhead costs and the standard or budgeted fixed overhead costs.

Direct Materials

Direct materials are raw materials that are directly incorporated into a finished product and are an essential part of the manufacturing process.