A Disadvantage of the FIFO Method Is That

question 91

Multiple Choice

A disadvantage of the FIFO method is that:

• A) recent sales are not matched with recent costs.
• B) the cost flow tends to follow the physical flow.
• C) the figure for ending inventory is made up of current costs on the income statement.
• D) None of the above is correct.

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Definitions:

Crowding-Out Effect

A situation where increased government spending leads to a reduction in private sector spending, which could negate the stimulus effect of the government's spending.

Government Borrowing

The act of governments raising funds through issuing debt securities or borrowing directly from financial institutions to finance government spending.

Private Sector

The private sector encompasses businesses and activities not owned or directly managed by the government, operating primarily through the private enterprise and market system.

Balanced Budget

A financial situation where revenues are equal to expenditures, resulting in no deficit or surplus.