Which of the Following Inventory Costing Methods Is Most Likely

question 194

Multiple Choice

Which of the following inventory costing methods is most likely to cause undesirable incentives for managers to build up finished goods inventory?

• A)Absorption costing
• B)Direct costing
• C)Variable costing
• D)Throughput costing

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Definitions:

Incurred

Refers to costs or expenses that have been realized or consumed in the operation of a business, often indicating that an economic event affecting the company's finances has taken place.

Depreciates

The process by which the value of an asset decreases over time, usually due to wear and tear or obsolescence.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value of the asset over time due to use and wear and tear.

Equipment

Tangible assets used in operations, such as machinery and office furniture, which have a useful life of more than one accounting period.