Asked by Mohith Ancha on Jul 03, 2024
Verified
A company may use more than one inventory cost formula if it has different types of inventory.
Inventory Cost Formula
An equation used to calculate the cost of ending inventory, taking into account the cost of goods sold, purchases, and beginning inventory, enabling accurate financial reporting and analysis.
- Absorb the nuances and applicability of FIFO, LIFO, and average cost equations in inventory financial calculations.
Verified Answer
JP
Josthel PiresJul 07, 2024
Final Answer :
True
Explanation :
Different types of inventory can have different characteristics and business rationales for using specific inventory cost formulas (e.g., FIFO, LIFO, weighted average). Accounting standards allow for this flexibility as long as the method chosen is consistently applied to each type of inventory and it reflects the actual cost flow.
Learning Objectives
- Absorb the nuances and applicability of FIFO, LIFO, and average cost equations in inventory financial calculations.
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