The Specific Identification Formula of Costing Inventories Is Used When

question 39

Multiple Choice

The specific identification formula of costing inventories is used when the

• A)physical flow of units cannot be determined.
• B)company sells large quantities of relatively homogeneous items.
• C)company has sophisticated technology to account for its inventory.
• D)company sells a small number of expensive, easily distinguishable items.

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Definitions:

Standard Cost System

This system assigns predetermined costs to the manufacture of products and services, used for budgeting and controlling expenses.

Fixed Manufacturing Overhead Rate

A constant charge that represents the total fixed manufacturing overhead costs divided by the standard allocation base.

Variances

The difference between planned or expected financial outcomes and the actual results achieved, often analyzed in budgeting and cost control.

Direct Labor-Hours

The number of hours spent by workers producing a company's goods, a measure of direct labor input.