Which of the Following Is Not a Guideline When Choosing

question 5

Multiple Choice

Which of the following is not a guideline when choosing between whether to use FIFO or the average cost method?

• A)Use the same cost formula for all inventories of a similar nature and use.
• B)Select the cost formula that best matches costs and revenues.
• C)Report an inventory cost on the statement of financial position that is close to the inventory's recent cost.
• D)Choose a cost formula that corresponds as closely as possible to the physical flow of goods.

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Definitions:

Price Level

Price level refers to the average of current prices across the entire spectrum of goods and services produced in the economy, a measure of inflation or deflation.

Inflation Rate

The percentage increase in the general price level of goods and services in an economy over a period of time, typically a year.

Consumer Confidence

Consumer confidence is a measure of how optimistic or pessimistic consumers are about their expected financial situation and the overall state of the economy.

Inflation Expectations

The rate at which people expect prices to rise in the future, which can influence their spending and saving behavior.