An Internal Auditor Found the Following Information While Reviewing the Monthly

question 75

Multiple Choice

An internal auditor found the following information while reviewing the monthly financial statements for a wholesaler of safety glasses: Opening inventory:       1,000 units at $2 per unit Purchased:                 5,000 units at $3 per unit Sold:                          3,000 units at $7 per unit The cost of goods sold was reported at $8,500. Which of the following inventory methods was used to derive this value?

• A) Average cost method.
• B) First-in, first-out (FIFO) method.
• C) Specific identification method.
• D) Activity-based costing method.

---

Definitions:

Futures Contracts

Legal agreements to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.

Domestic Sugar

Sugar produced and consumed within a country's borders, not involving any international trade.

Option Contract

A contract which grants the holder the right to buy or sell an underlying asset at a predetermined price within a specified time frame.

Hedge Risk

A financial strategy used to limit or offset the probability of loss from fluctuations in the prices of currencies, commodities, or securities.