The LIFO Conformity Rule States That If LIFO Is Used

question 21

Multiple Choice

The LIFO conformity rule states that if LIFO is used for:

• A)One class of inventory,it must be used for all classes of inventory.
• B)Tax purposes,it must be used for financial reporting.
• C)One company in an affiliated group,it must be used by all companies in an affiliated group.
• D)Domestic companies,it must be used by foreign partners.

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Definitions:

Process Cost

An accounting method that accumulates direct and indirect costs of a continuous manufacturing process, allocating them to finished units of output, suitable for mass production industries.

Conversion Cost

The sum of direct labor and manufacturing overhead costs, representing the expenses to convert raw materials into finished goods.

Direct Materials

The raw materials and components that are directly used in the production of a product and can be easily associated with it.

Fabrication Department

A specialized division within a company responsible for the manufacturing and assembly of products or components.