Which of the following statements concerning cost formulas in a periodic inventory system is correct?
A) The results under FIFO in a periodic system are the same as in a perpetual system.
B) In a periodic system using average, the latest units purchased before each sale are allocated to the cost of goods sold.
C) In a periodic system using the average cost formula, a new average is calculated after each purchase.
D) The results under average in a periodic system are the same as in a perpetual system.

Question

Quizplus · Accepted Answer

In a periodic inventory system, the FIFO (First-In, First-Out) method yields the same results regardless of whether it is applied in a periodic or perpetual system. This is because FIFO always assumes that the first items purchased are the first ones sold, and this principle applies uniformly in both systems. Choices B and C are incorrect because, in a periodic system using the average cost method, the average cost is calculated at the end of the period based on the total cost of goods available for sale and the total units available, not after each purchase. Choice D is incorrect because the results under the average cost method can differ between periodic and perpetual systems due to the timing of when the averages are calculated.

Which of the Following Statements Concerning Cost Formulas in a Periodic