Question

The basic cost flow model applies only to physical units and not to costs. Group of answer choices True False

Answer 1

The statement is: False.

Step-by-step explanation:

Cost flows refer to the forms costs flow in an out a company. The cost flow model is used to compare perpetual and physical inventory and is calculated by taking the balance of the firm at the beginning of the year adding the transfers that flow in and subtracting all the transfers flowing out the company. The result will be the ending cost flow balance.

Answer 2

False

Step-by-step explanation:

The basic cost flow model is used for inventory, and the formula is:

(Starting balance)+(Incoming Cost)-(Outgoing cost) = Ending balance

Starting balance = represents cost of resources that have been used so far.

Incoming cost = represents cost from previous periods.

Outgoing cost = represents cost attributed to goods ready for sale.

Ending balance = is the cost at the end of period under consideration.

So as can be seen in the formula, basic cost flow also involves costs. So the statement is False