The Choice of Valuation Method for Inventories Would Normally Not

question 83

Multiple Choice

The choice of valuation method for inventories would normally not affect which item(s) used in calculating Return on Investment (ROI) ?

• A) The valuation of fixed assets (e.g., Plant, Property, and Equipment) used by an investment center.
• B) The amount of operating income earned by an investment center in a given period.
• C) Both the investment base and the level of operating income reported by an investment center.
• D) The estimated value of current assets of a business entity, such as an investment center.
• E) The return on sales (ROS) of an investment center for the period.

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Definitions:

Work in Process

Inventory items that are currently in the midst of the production process, not yet completed goods.

Standard Costs

Predetermined costs for products or services, used for budgeting and measuring performance against actual costs.

Raw Materials

These are the basic substances in their natural, modified, or semi-processed state, used as an input to a production process for manufacturing.

Standard Costs

Predetermined or estimated costs used to compare against actual costs, serving as a benchmark for measuring financial performance.