The LIFO Method of Inventory Valuation Bases the Cost of Goods

question 141

Multiple Choice

The LIFO method of inventory valuation bases the cost of goods sold on the cost of

• A) merchandise that has been held in inventory for the longest period of time.
• B) most recent merchandise purchased by the firm.
• C) actual units customers purchased.
• D) merchandise the firm acquired at the lowest cost.

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Definitions:

Materials Cost

The expense incurred for materials that are used in the production of goods or services.

Direct Labor Costs

Direct labor costs are the wages paid to employees who are directly involved in the production of goods or services.

Conversion Costs

Conversion costs are expenses incurred during the process of converting raw materials into finished products, including both direct labor and manufacturing overhead.

Manufacturing Process

A sequence of operations involving the conversion of raw materials into finished goods.