Which Statement Is Correct About Cost Allocation Methods Under GAAP

question 151

Multiple Choice

Which statement is correct about cost allocation methods under GAAP?

• A)FIFO method expenses the oldest costs first.
• B)FIFO method has the oldest costs on the balance sheet.
• C)FIFO method has the most recent costs in the income statement.
• D)FIFO is not an acceptable cost allocation method.

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Definitions:

Producer Surplus Gain

The difference between what producers are willing to accept for a good versus what they actually receive, often resulting from higher market prices.

Consumer Surplus Loss

The reduction in consumer surplus due to changes in market conditions such as price increases or decreases in available goods.

Individual Seller

A single entity or person engaged in the act of selling goods or services, typically on a small scale or directly to consumers.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, due to higher market price.