Which cost formula provides the better (1) statement of income and (2) statement of financial position valuations, respectively?
A)(1)average and (2)FIFO
B)(1)FIFO and (2)average
C)(1)FIFO and (2)FIFO
D)(1)average and (2)average

Question

Quizplus · Accepted Answer

FIFO provides a better statement of income as it matches older costs with current revenues, reflecting current market conditions. Average cost provides a more stable and representative valuation for the statement of financial position by smoothing out price fluctuations.

Which Cost Formula Provides the Better (1) Statement of Income