What Is the Best Way to Validate Costs

question 32

Multiple Choice

What is the best way to validate costs?

• A) Validating costs is not necessary.
• B) Adjust your business model.
• C) Ask your customers.
• D) Compare your balance sheet with your competitors' balance sheets.
• E) Compare your common-sized income statement with the industry averages or some benchmark companies.

---

Definitions:

FIFO

An inventory valuation method where the first items purchased are the first ones to be used or sold.

Cost Per Unit

The total expense involved in creating a product, divided by the number of units produced, giving a per-unit cost.

Journal Entries

Recorded transactions in a company's general ledger, showing accounts affected and amounts, to maintain accurate financial records.

Process Cost System

An accounting system used in manufacturing where costs are assigned to batches or processes, suitable for homogeneous products.