Which of the Following Cost Formulas Would Be Most Appropriate

question 24

Multiple Choice

Which of the following cost formulas would be most appropriate for costing an inventory of liquids stored in tanks?

• A)weighted-average
• B)FIFO
• C)periodic
• D)perpetual

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Definitions:

Annual Fixed Expenses

Expenses that do not change in total regardless of changes in the volume of activity or production levels, such as rent or salaries.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, showing how much contributes to covering fixed costs and earning profit.

Break-even Point

The level of production or sales at which total revenues equal total expenses, resulting in no net profit or loss.

Fixed Expenses

Costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance premiums.