If, for a Given Policy Option, PVNB Equals $1,200, and PVC

question 7

Multiple Choice

If, for a given policy option, PVNB equals $1,200, and PVC equals $800, then

• A) the policy option is not feasible because the value of PVB is $400
• B) the ratio, PVB/PVC, equals 1.5
• C) the policy option is feasible because (PVB - PVC) is greater than unity
• D) there is insufficient information to determine if the policy option is feasible

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Definitions:

Perpetual Inventory System

An inventory accounting approach that instantly documents inventory purchases or sales using computerized point-of-sale systems and enterprise asset management software.

Inventory Ledger

A record that keeps track of the detailed inventory transactions of a business, including purchases, sales, returns, and write-offs.

Cost Flow

The pattern in which costs move through a business, beginning with the acquisition of raw materials and ending with the delivery of final products to consumers.

First-In, First-Out

A method of valuing inventory that presumes items are sold in their purchase sequence, first selling the oldest products.