Which Statement Concerning Lower-Of-Cost-Or-Net-Realizable-Value (LCNRV) Is Incorrect

question 119

Multiple Choice

Which statement concerning lower-of-cost-or-net-realizable-value (LCNRV) is incorrect?

• A)LCNRV is an example of a company choosing the accounting method that will be least likely to overstate assets and income.
• B)Under the LCNRV basis, market does not apply because assets are always recorded and maintained at cost.
• C)The LCNRV basis is justified because of a decline in the selling price of the inventory item.
• D)LCNRV is applied after one of the cost flow assumptions has been applied.

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Definitions:

Order Cost

Expenses associated with placing and processing orders in a supply chain, including costs related to purchasing, ordering, shipping, and receiving goods.

Economic Order Quantity

A formula used to determine the most efficient order size that minimizes the total cost of inventory management, including ordering and holding costs.

Production Order Quantity Model

An inventory management method used to determine the optimal order quantity that minimizes the total holding and ordering costs.

Setup Cost

The cost incurred to prepare equipment or a process for production, including the cost of adjusting machinery and the labor cost of setting up.