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.

Realize the role of materials, labor, and overhead (conversion costs) in the computation of equivalent units and overall product cost in a process costing environment.

Analyze the differences and applications of the direct and step-down methods of service department cost allocation.

Identify how the completeness of work-in-process inventory affects the calculation of equivalent units.

Recognize the impact of cost allocation methods on cost control in process costing.

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Definitions:

Credit Card

A payment card issued by a financial institution allowing the cardholder to borrow funds for the purchase of goods and services with the promise to repay the borrowed amount along with any agreed-upon fees.

Debit Card

A card used to electronically subtract money from a bank account to pay for goods or services.

Relative Advantages

The degree to which an innovation or solution is perceived to be better than the idea, program, or product it replaces.

Dishonors

Refers to the refusal or inability of a party to accept or pay a bill of exchange, check, or draft when presented for payment.