Which Inventory Method Is Better Described as Having an Income

question 21

Multiple Choice

Which inventory method is better described as having an income statement focus and why is it considered as such?

• A)FIFO; better approximates the value of ending inventory.
• B)LIFO; better approximates the value of ending inventory.
• C)LIFO; better approximates inventory cost necessary to generate revenue.
• D)FIFO; better approximates inventory cost necessary to generate revenue.

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Definitions:

Performance Report

A document or record that outlines the performance outcomes, efficiency, and effectiveness of efforts over a defined period.

Profit Center

A segment or division within an organization directly responsible for generating profit through its operations and activities.

Responsibility Accounting

An accounting system that measures the results of each responsibility center, allowing for more effective planning and control within an organization.

Responsibility Reporting

An accounting system that collects, summarizes, and reports financial information about different responsibility centers within an organization.