Question

What method does Lion Company use?

1) Weighted average method
2) First-in, first-out method
3) Last-in, first-out method
4) Specific identification method

Answer 1

Lion Company uses the weighted average method to calculate the cost of inventory.

Step-by-step explanation:

Lion Company uses the weighted average method to calculate the cost of its inventory. This method takes into account the cost of each unit in inventory and assigns a weighted average cost to the units sold or remaining in inventory. It is commonly used when inventory consists of similar items with similar costs.

Unlike the weighted average method, Lion Company does not use the first-in, first-out (FIFO) method, which assumes that the first units purchased are the first units sold. Similarly, it does not use the last-in, first-out (LIFO) method, which assumes that the last units purchased are the first units sold.

Lion Company also does not use the specific identification method, which involves keeping track of the cost of each specific item in inventory. This method is typically used for unique or high-value items.