Inventory Costing Methods

Which inventory costing method assumes that the most recent cost of merchandise should be charged against current revenue?

• First in first out (FIFO)

• Last in first out (LIFO)

• Weighted average

• None of the above

In the FIFO method, which units are assumed to be sold first?

• The units from the most recent purchases

• The units from the earliest purchases

• The units from the middle purchases

• The units from the highest priced purchases

In the LIFO method, which units are assumed to be sold first?

• The units from the most recent purchases

• The units from the earliest purchases

• The units from the middle purchases

• The units from the highest priced purchases

Which inventory costing method calculates the average unit price of the total inventory available?

• First in first out (FIFO)

• Last in first out (LIFO)

• Weighted average

• None of the above

In a period of rising prices, which inventory costing method has the highest relative cost of ending inventory?

• First in first out (FIFO)

• Last in first out (LIFO)

• Weighted average

• All methods have the same relative cost

In a period of rising prices, which inventory costing method has the lowest relative cost of merchandise sold?

• First in first out (FIFO)

• Last in first out (LIFO)

• Weighted average

• All methods have the same relative cost

Which inventory costing method should a business choose?

• The method that provides the highest gross profit

• The method that provides the highest net income

• The method that provides the best accounting method for its managers

• The method that is easiest to calculate

What happens if a business changes its inventory costing methods?

• The gross profit and net income will remain the same

• The gross profit and net income will increase

• The gross profit and net income will decrease

• The gross profit and net income will be affected by the change in methods

What is the formula to calculate the cost of merchandise sold?

• Cost of merchandise available for sale - Cost of ending inventory

• Cost of merchandise available for sale + Cost of ending inventory

• Cost of merchandise available for sale * Cost of ending inventory

• Cost of merchandise available for sale / Cost of ending inventory

What is the cost of ending inventory in the weighted average method?

• $536.96

• $594

• $484

• $360.72