If a Business Operates in an Industry That Does Not

question 168

Essay

If a business operates in an industry that does not experience significant cost changes,should the business prepare its production cost report using the FIFO method or the weighted-average method? Explain your answer.

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Definitions:

Fixed Selling Expenses

Fixed selling expenses are those costs associated with selling a product that do not change with the level of production or sales, such as salary of sales staff and rent for office space.

Administrative Expenses

Administrative expenses are the costs associated with the general administration of a business, such as salaries of office staff, utilities, and rent.

Schedule of Expected Cash Collections

A detailed projection of the amounts and timing of cash inflows from receivables anticipated to be collected.

Merchandise Purchases Budget

A financial plan that outlines the expected purchases of merchandise inventory over a certain period, considering anticipated sales and desired inventory levels.