Which of the Following Statements About the Use of the FIFO

question 5

Multiple Choice

Which of the following statements about the use of the FIFO assumption is NOT true?

• A) The FIFO assumption assigns the more recent purchase costs to the balance sheet inventory asset account.
• B) The FIFO assumption is not affected by the inventory control method.
• C) In periods of rising prices it produces a higher profit than LIFO.
• D) The FIFO assumption produces inventory asset values that are based on older purchase costs.

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Definitions:

Standard Costs

Predicted costs for performing a task under normal conditions, used for budgeting and measuring performance.

Work in Process

Inventory consisting of items that are in the production process but are not yet completed, indicating partially finished goods.

Direct Labor

The labor costs directly associated with the manufacture of products or delivery of services.

Standard Costs

The expected costs associated with producing a product or performing a service, used for budgeting and performance analysis.