In Applying LCM, Market Cannot Be

question 35

Multiple Choice

In applying LCM, market cannot be:

• A) Less than net realizable value.
• B) Greater than the normal profit.
• C) Less than the normal profit margin.
• D) Greater than net realizable value.

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Definitions:

Factory Overhead

The indirect costs involved in manufacturing beyond direct materials and labor costs, including expenses like equipment maintenance, utilities, and factory management salaries.

Machine Hours

Machine hours refer to the total time that a piece of machinery or equipment is operated within a specific period, often used as a basis for allocating manufacturing overhead costs.

Perpetual System

An inventory management system that continuously updates inventory records, reflecting purchases and sales in real-time.

First-In, First-Out

An inventory valuation method that assumes that the first items placed in inventory are the first items sold, ideal for products that are perishable or have a short shelf life.