Which Inventory Cost Flow Assumption Is Most Often Used by Businesses

question 85

Multiple Choice

Which inventory cost flow assumption is most often used by businesses that sell a limited number of high-priced items?

• A) Average cost
• B) FIFO
• C) Specific identification
• D) LIFO

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Definitions:

Factory Overhead Cost

All indirect costs associated with manufacturing, including utilities, maintenance, and manager salaries, but not direct materials or direct labor.

Manufacturing Process

The series of steps through which raw materials are transformed into a final product, involving both physical or chemical procedures.

Direct Costs

Expenses that can be directly attributed to the production of specific goods or services, such as raw materials and labor.

Cost Object

Any item for which costs are separately measured and assigned, including products, services, projects, or departments.