Which cost determination method smoothes the effects of price changes?
A)specific identification
B)FIFO
C)average cost
D)lower of cost and net realizable value

Question

Quizplus · Accepted Answer

The average cost method uses the weighted average cost of all units in inventory, which spreads the effects of price changes over all units. This results in a smoother cost determination compared to specific identification or FIFO methods. The lower of cost and net realizable value method is not a cost determination method, but rather a method of valuing inventory that is written down to its net realizable value if it falls below its cost.

Which Cost Determination Method Smoothes the Effects of Price Changes