Use of the FIFO Inventory Valuation Method Enables a Company

question 130

True/False

Use of the FIFO inventory valuation method enables a company to report higher net income when in a period of falling prices.

---

Definitions:

Efficiency Variance

A measure in cost accounting used to assess the difference between the actual input used in production and the standard input expected to be used, for cost control purposes.

Direct Labour Hour

A measure of labor directly involved in manufacturing or production, calculated by the amount of time workers spend on specific tasks.

Fixed Overhead

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

Budget Variance

The difference between the budgeted or planned amounts and the actual amounts incurred.