The Managers of Venice Company Receive Performance Bonuses Based on the Net

question 84

Multiple Choice

The managers of Venice Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?

• A) LIFO
• B) Average Cost
• C) FIFO
• D) Physical inventory method

---

Definitions:

Raw Material

Basic substances in their natural, modified, or unprocessed states, used in the production or manufacturing of goods.

Direct Labor

The labor costs directly tied to the production of goods or services, such as wages for employees on the production line.

Direct Labor Rate Variance

The difference between the actual cost of labor per hour and the standard cost, multiplied by the total hours worked, used to assess labor cost management.

Standard Hours

Standard hours refer to the set amount of time expected to complete a task or job based on efficiency standards.