Selection of an inventory cost formula 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 physical flow of goods is the most significant factor that should influence the selection of an inventory cost formula by management. This is because the inventory cost formula (such as FIFO, LIFO, or weighted average) should ideally reflect how inventory actually flows through a business, ensuring that the cost of goods sold and ending inventory values reported in financial statements are realistic and relevant to the business operations.

Selection of an Inventory Cost Formula by Management Should Be