Lanier Company Began Operations on January 1, 2010, and Uses

question 69

Multiple Choice

Lanier Company began operations on January 1, 2010, and uses the FIFO method in costing its raw material inventory.Management is contemplating a change to the average cost method and is interested in determining what effect such a change will have on net income.Accordingly, the following information has been developed:

Based upon the above information, a change to the average cost method in 2011 would result in net income for 2011 of

• A)$540,000.
• B)$600,000.
• C)$620,000.
• D)$660,000.

Understand the economic entity assumption and the separation of business and personal transactions.

Understand the importance and application of adjusting entries in financial accounting.

Recognize the key accounting assumptions and how they affect financial reporting.

Identify the characteristics and implications of different types of accounting periods.

---

Definitions:

Sales Forecast

An estimate of the amount of revenue that a company expects to generate from the sale of goods or services in a future period.

Planning Horizon

The future time period over which plans and strategies are developed and analyzed.

Direct Materials Budget

A financial plan that estimates the raw materials required for production and the expected costs.

Quantity Purchased

The total amount of a product that a consumer or company acquires.