Choosing a cost flow assumption to be applied to inventory,such as FIFO or weighted average,is to solve the problem of:
A) determining the quantity of inventory on hand
B) determining the stock loss from theft or destruction
C) determining which costs to apply to sold and unsold inventory
D) determining net realisable value

Question

Quizplus · Accepted Answer

Choosing a cost flow assumption helps in determining which costs to apply to sold and unsold inventory. This is important in determining the cost of goods sold and the value of ending inventory, which affects the financial statements and tax liability. While determining the quantity of inventory on hand and net realisable value are also important aspects of inventory management, choosing a cost flow assumption primarily addresses the issue of cost allocation.

Choosing a Cost Flow Assumption to Be Applied to Inventory,such