One of the Principal Reasons for Selecting the LIFO Cost

question 29

Multiple Choice

One of the principal reasons for selecting the LIFO cost flow assumption instead of the FIFO cost flow assumption in an inflationary economic environment is that:

• A)net income will be higher.
• B)income taxes will be lower.
• C)balance sheet inventory values will be higher.
• D)a higher selling price can be established.

Understand the allocation of costs using different costing systems and their impact on product costing.

Recognize the limitations of traditional costing systems and the necessity for activity-based costing in certain scenarios.

Calculate activity rates and apply overhead costs to products using ABC.

Analyze the impact of different costing methods on product costs and financial reporting.

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Definitions:

Significance Level

The significance level, often denoted by alpha (α), is the threshold chosen by the researcher to determine the statistical significance of an outcome; it's the probability of rejecting the null hypothesis when it is true.

Highly Significant

A term used in statistical analysis to denote results that vastly exceed the threshold for statistical significance, often suggesting a strong effect or association.

p < .001

p < .001 indicates that the probability of the observed data, or something more extreme, assuming the null hypothesis is true, is less than 0.1%, which is considered highly statistically significant.

Within-group Variability

The measure of how much individual observations in a single group differ from each other in a dataset.