The Possible Methods for Accounting for Pre-Production Costs in the Extractive

question 21

Multiple Choice

The possible methods for accounting for pre-production costs in the extractive industries include:

• A) costs-written-off-and-reinstated method and ABC-cost method.
• B) successful-effort method and area-of-interest method.
• C) reserve-accounting method and successful-effort method.
• D) percentage-of-completion method and costs-written-off-and-reinstated method.

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Definitions:

First-In, First-Out Method

An inventory valuation method that assumes goods are sold in the order they are acquired, with the oldest items sold first.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed units of production, making them comparable to fully completed units.

Conversion Costs

The sum of direct labor costs and manufacturing overhead costs incurred to convert raw materials into finished goods.

Completion Ratios

A measure used to evaluate the extent to which a task, project, or goal has been completed, often expressed as a percentage.