Two Companies Report the Same Cost of Goods Available for Sale

question 32

Multiple Choice

Two companies report the same cost of goods available for sale but each employs a different inventory costing method.If the price of goods has increased during the period, then the company using

• A)LIFO will have the highest ending inventory.
• B)FIFO will have the highest cost of good sold.
• C)FIFO will have the highest ending inventory.
• D)LIFO will have the lowest cost of goods sold.

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Definitions:

Unit Product Cost

The total cost associated with creating one unit of product, including materials, labor, and overhead.

Variable Costing

An accounting method where only the variable production costs are allocated to the product, while fixed costs are treated as period costs.

Net Operating Income

The total income from operations of a company before taxes and interest deductions.

Variable Costing

An accounting strategy that only accounts for variable production expenditures (direct materials, direct labor, and variable manufacturing overhead) in product pricing.