Lou and Toby Both Live in a Little Town and Are

question 29

Multiple Choice

Lou and Toby both live in a little town and are trying to sell their cars. Both of their cars have a blue book value of $10,000. Lou has an American car like most of the people in town own. Toby owns the only Bulgarian car in town. If people in their town are risk averse, then who will get closest to the blue book value for his car?

• A)Lou will because American cars are better than Bulgarian cars.
• B)Toby will because there is less uncertainty about the quality of Lou's car.
• C)Lou will because there is less uncertainty about the quality of Lou's car.
• D)Both should get the same price for their cars because both cars have the same blue book value.

---

Definitions:

FIFO

"First In, First Out," an inventory valuation method assuming that the oldest items in inventory are sold or used first.

LIFO

A inventory valuation method where the last items added to inventory are the first ones sold, standing for "Last In, First Out."

Average Cost

A calculation of the total cost of goods available for sale divided by the total units available for sale, used to compute cost of goods sold in certain inventory valuation methods.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold in a company.