The Consistency Concept

question 94

Multiple Choice

The consistency concept:

• A) Prescribes a company to consistently apply the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting.
• B) Requires a company to use one method of inventory valuation exclusively.
• C) Requires that all companies in the same industry use the same accounting methods of inventory valuation.
• D) Is also called the full disclosure principle.
• E) Is also called the matching principle.

---

Definitions:

Economies of Scale

The price benefits that firms enjoy from the magnitude of their operations, where the cost of each output unit generally lessens as the scale of operations increases.

Unit Costs

The financial outlay for a company to manufacture, warehouse, and dispose of one unit of a specific item or service.

Output

Represents the total amount of goods or services produced by a firm or economy in a specific period.

Minimum Efficient Scale

The smallest level of production a firm can achieve while still taking full advantage of economies of scale in terms of cost per unit.