The Specific Identification Method of Inventory Costing

question 117

Multiple Choice

The specific identification method of inventory costing

• A) always maximizes a company's gross profit.
• B) always minimizes a company's gross profit.
• C) has no effect on a company's gross profit.
• D) may enable management to manipulate gross profit by picking which units to sell.

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Definitions:

Total Cost

Total Cost refers to the complete expense incurred in producing, maintaining, and selling a product or service, which includes fixed and variable costs.

Materials Labor

Generally refers to the workforce involved in the handling, preparation, and processing of materials in manufacturing.

Overhead Costs

Indirect costs required to run a business but cannot be directly attributed to a specific product or service.

Period Costs

Expenses that are not directly tied to the production process and are typically recorded as expenses in the period in which they are incurred.