Selection of an inventory cost method by management should be influenced most by the
A)fiscal year end.
B)physical flow of goods.
C)goal of reporting inventory at its lowest cost.
D)Income tax effects.

Question

Quizplus · Accepted Answer

The selection of an inventory cost method should be primarily based on the physical flow of goods. This means that the method chosen should reflect the actual order in which goods are sold or used in production. This provides an accurate representation of the cost of goods sold and ending inventory. Other factors such as fiscal year end, reporting inventory at its lowest cost, and income tax effects should be considered to a lesser extent. However, they should not be the primary factor in selecting an inventory cost method.

Selection of an Inventory Cost Method by Management Should Be