If Purchase Prices Are Falling,which Cost Flow Assumption Provides the Highest

question 39

Multiple Choice

If purchase prices are falling,which cost flow assumption provides the highest cost of goods sold?

• A) FIFO
• B) annual weighted average
• C) moving weighted average
• D) LIFO.

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Definitions:

Fabricating Department

A division within a manufacturing company where raw materials are assembled or processed into finished goods.

FIFO Method

An inventory valuation method (First-In, First-Out) where the oldest items in inventory are sold or used first.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, expressed in terms of full units of output.

Direct Materials

Materials that can be directly linked to the production process of a product and are essential components of the final product.