Which of the following statements about the weighted-average cost formula is true?
A)If prices are rising,companies prefer it because it lowers their tax liability.
B)It is the most popular method in Canada.
C)In times of rising prices,weighted-average will produce a higher net income than FIFO.
D)In time of rising prices,weighted-average produces an inventory cost per unit that is higher than the cost per unit of cost of goods sold.

Question

Quizplus · Accepted Answer

In times of rising prices, using the weighted-average cost method can result in a higher cost of goods sold (COGS) compared to other inventory valuation methods like FIFO (First-In, First-Out). This higher COGS can lead to lower reported net income, which in turn can lower a company's tax liability. This is why companies might prefer the weighted-average cost method in such economic conditions.

Which of the Following Statements About the Weighted-Average Cost Formula