Which of the following would not be affected by the choice of an inventory costing method (that is between FIFO,LIFO,weighted average,and specific identification)?
A)Net sales
B)Cost of goods sold
C)Gross profit
D)Net income

Question

Quizplus · Accepted Answer

Net sales are not affected by the choice of an inventory costing method.

As for the best choice(s):

It depends on the specific situation and goals of the company. Each inventory costing method has its advantages and disadvantages.

FIFO (first-in, first-out) tends to result in a higher ending inventory and a lower cost of goods sold, which may lead to higher net income in periods of rising prices.

LIFO (last-in, first-out) tends to result in a lower ending inventory and a higher cost of goods sold, which may lead to lower taxable income in periods of rising prices but also may not reflect the actual physical flow of inventory.

Weighted average smoothes out the cost per unit by taking into account all units in inventory and their respective costs, providing a balance between FIFO and LIFO.

Specific identification matches each unit of inventory with its actual cost, which is useful for unique or high-value items but may be difficult to track for large quantities of inventory with similar items.

Ultimately, the company should choose the cost method that best reflects its business and financial goals while complying with applicable accounting standards and regulations.

Which of the Following Would Not Be Affected by the Choice