There Are Many Different Methods Available for Costing Inventory

question 88

Essay

There are many different methods available for costing inventory. Therefore, the decision on which method to select should involve some serious thought as to the consequences involved.
Required:
a. Discuss the objectives of inventory costing in terms of accounting principles.
a. One objective of inventory costing is to match costs of goods sold with the revenues they helped generate in conformity with the matching principle. The other objective in inventory costing is to assign an appropriate value to the
b. Explain the consequences of the method selected.

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Definitions:

Dividends Paid

The part of a corporation's profits paid out to its shareholders, typically as cash or more stocks.

Discount

It is a reduction from the usual cost of something, often applied to encourage early payment or to reward bulk purchases.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time, typically expressed in terms of an annual percentage rate.

Market Interest Rate

The current rate of interest available in the market that borrowers must pay to obtain funds.