Question

Which of the following statements is correct?

a.A company must apply the same cost flow assumption to all its inventory.
b.A company must apply one cost flow assumption to at least 80% of the inventory.
c.A company can apply more than one inventory cost flow assumption.

Answer 1

The correct answer is C

Step-by-step explanation:

Cost flow assumption is described as in which the costs is removed from the inventory of the company and will be recorded as the COGS (Cost of goods sold). It is used by companies because companies experience variations in the price of the same inventory over the year and the company can apply more than 1 cost flow assumption like LIFO, FIFO or average for inventory.