What Is (Are)the Main Reason(s)for Not Using LIFO

question 6

Multiple Choice

What is (are) the main reason(s) for not using LIFO?

• A) Inflation is very limited today in developed economies and there is often simultaneously inflation and deflation on different products or resources thus the reporting benefit of LIFO might not be significant.
• B) With even a small inflation,the LIFO-based taxable income would be less than it would be under FIFO or WAC and,if there is deflation,LIFO might create larger swings in taxable income levels than would WAC or FIFO.
• C) LIFO in periods of heavy inflation may lead to a negative valuation of an inventory that is physically real,thus giving less credibility to the balance sheet.
• D) All of these

Recognize the role and impact of small businesses in the economy.

Analyze scenarios to identify key factors in business success or failure.

Understand the concept of economies of scale and its benefits.

Identify the characteristics and significance of microbusinesses.

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Definitions:

Conversion Costs

Expenses related to transforming raw materials into finished goods, comprising direct labor and manufacturing overhead.

Process Costing

A costing method used in manufacturing where costs are assigned to batches or production runs, typically suitable for standardized products.

Weighted-Average Method

An inventory costing method that assigns a cost to inventory items based on the weighted average of costs of similar goods available during the period.

Cost Reconciliation

The process of analyzing and adjusting the differences between reported costs and actual costs.