CPA Business Environment and Concepts (BEC) : LIFO, FIFO, & Weighted Average Inventory Methods
Study concepts, example questions & explanations for CPA Business Environment and Concepts (BEC)
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Example Questions
Example Question #1 : Lifo, Fifo, & Weighted Average Inventory Methods
Which inventory costing method would a company that wishes to maximize profits in a period of rising prices use?
Weighted average
LIFO
FIFO
Moving average
FIFO
In a period of rising prices, the oldest inventory, or the inventory used in FIFO would be the least expensive. Thus, the profit margin would be the largest here.
Example Question #2 : Lifo, Fifo, & Weighted Average Inventory Methods
Assuming constant inventory quantities, which of the following inventory costing methods will produce a lower inventory turnover ratio in an inflationary economy?
Moving average
LIFO
FIFO
Weighted average
FIFO
In a period of rising prices, the oldest inventory, or the inventory used in FIFO would be the least expensive. Thus, the profit margin would be the largest here.
Example Question #111 : Cpa Business Environment And Concepts (Bec)
During periods of inflation, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system under which of the following inventory valuation methods?
LIFO
FIFO and LIFO
Neither
FIFO
FIFO
Only under FIFO would the use of a perpetual system result in the same dollar amount of ending inventory as a periodic system.
Example Question #112 : Cpa Business Environment And Concepts (Bec)
Which of the following costing methods will yield the lowest inventory value?
Hybrid
Variable
Absorption
Process
Variable
Variable costing typically produces the lowest inventory values since only variable costs are capitalized.
Example Question #111 : Cpa Business Environment And Concepts (Bec)
Which of the following costs is deducted from revenues of a manufacturing company in order to determine gross margin, but not deducted from revenues to determine contribution margin?
Variable manufacturing
Fixed selling and administrative
Fixed manufacturing
Variable selling and administrative
Fixed manufacturing
Under the absorption approach, all fixed and variable manufacturing overhead is part of cost of goods sold to determine an entity's gross margin.
Example Question #114 : Cpa Business Environment And Concepts (Bec)
The equivalent units of production method can be calculated by using either:
FIFO or weighted average
LIFO or weighted average
LIFO or moving average
FIFO or LIFO
FIFO or weighted average
Using the FIFO method accounts for work to be finished and using the weighted average method blends the units.
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