When Prices Start Falling in the Economy and Margins Shrink

question 89

Multiple Choice

When prices start falling in the economy and margins shrink, this implies that:

• A) demand is growing at a slower rate than supply.
• B) supply in the economy is falling.
• C) the economy is at the peak of a boom.
• D) the economy is expanding.

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Definitions:

FIFO Method

An inventory valuation method that assumes items purchased or produced first are sold first, and the newer inventory remains unsold.

Equivalent Units

Equivalent units are used in cost accounting to express the amount of work done on incomplete products in terms of fully completed units of output.

Materials

Raw items or components that are used to manufacture a finished product.

FIFO Method

First-In, First-Out methodology in inventory and cost accounting that assumes the first items produced or acquired are the first ones sold.