Which of the Following Methods of Applying the Lower-Of-Cost-Or-Market Rule

question 28

Multiple Choice

Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest write-downs of inventory?

• A)The entire stock of inventory in aggregate.
• B)Average of cost of goods sold for the past three years.
• C)Major classes or categories of inventory.
• D)Each individual inventory item.

---

Definitions:

Credit Sales

Sales made on credit, where payment is received after the goods or services are delivered.

Cash Sales

Transactions where the purchase of goods or services is paid for with cash at the time of sale.

Sales Forecast

The process of estimating future sales, helping businesses make informed procurement, production, and marketing decisions.

Budgeted Cash

An estimation of cash inflows and outflows for a business over a specific period, used for financial planning purposes.