In a Period of Rising Prices,a Company Is Most Likely

question 87

Multiple Choice

In a period of rising prices,a company is most likely to use the FIFO method of pricing inventory if:

• A)Each item in the inventory is unique.
• B)Management wants the same unit cost assigned to items sold and items remaining in inventory.
• C)Management's primary objective is to minimize income taxes.
• D)Management wants the company's income statement to indicate the highest possible amounts of gross profit and net income.

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Definitions:

Persistent Shortage

A situation where the demand for a good or service consistently exceeds its supply, over a significant period of time.

Deadweight Loss

The loss of economic efficiency when the equilibrium for a good or a service is not achieved or is not achievable.

Rent Control

A government policy or law that sets a maximum price landlords can charge for rent.

Opportunity Costs

The cost of the next best alternative foregone when making a decision.