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Which cost price method assumes that the costliest materials are issued first and values the inventory at the lowest possible price?
- a)Specified Price Method
- b)First-in First-out (FIFO) Method
- c)Last-in First-out (LIFO) Method
- d)Highest-in First-out (HIFO) Method
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Which cost price method assumes that the costliest materials are issue...
Explanation:
Highest-in First-out (HIFO) Method:
The Highest-in First-out (HIFO) method assumes that the costliest materials are issued first. This means that the items with the highest cost are considered to be the first ones used in production or sale.
Valuing Inventory:
- The HIFO method values the inventory at the lowest possible price because it assumes that the most expensive items are the first ones to be sold or used.
- This method results in a lower valuation of inventory compared to other cost price methods like First-in First-out (FIFO) or Last-in First-out (LIFO).
Advantages:
- HIFO can be beneficial during periods of inflation as it leads to a lower valuation of inventory, which can result in lower taxable income.
- It can also help in reducing the impact of rising costs on the financial statements of a business.
Disadvantages:
- HIFO may not accurately reflect the actual flow of inventory in a business, as it assumes that the most expensive items are always used first.
- This method may not be in accordance with Generally Accepted Accounting Principles (GAAP) in some jurisdictions.
In conclusion, the Highest-in First-out (HIFO) method values inventory at the lowest possible price by assuming that the costliest materials are issued first. It has its advantages and disadvantages, and businesses should carefully consider these factors before choosing this cost price method.
Highest-in First-out (HIFO) Method:
The Highest-in First-out (HIFO) method assumes that the costliest materials are issued first. This means that the items with the highest cost are considered to be the first ones used in production or sale.
Valuing Inventory:
- The HIFO method values the inventory at the lowest possible price because it assumes that the most expensive items are the first ones to be sold or used.
- This method results in a lower valuation of inventory compared to other cost price methods like First-in First-out (FIFO) or Last-in First-out (LIFO).
Advantages:
- HIFO can be beneficial during periods of inflation as it leads to a lower valuation of inventory, which can result in lower taxable income.
- It can also help in reducing the impact of rising costs on the financial statements of a business.
Disadvantages:
- HIFO may not accurately reflect the actual flow of inventory in a business, as it assumes that the most expensive items are always used first.
- This method may not be in accordance with Generally Accepted Accounting Principles (GAAP) in some jurisdictions.
In conclusion, the Highest-in First-out (HIFO) method values inventory at the lowest possible price by assuming that the costliest materials are issued first. It has its advantages and disadvantages, and businesses should carefully consider these factors before choosing this cost price method.
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Which cost price method assumes that the costliest materials are issue...
The correct answer is Option D: Highest-in First-out (HIFO) Method. This method assumes that the costliest materials are issued first and values the inventory at the lowest possible price. It is mainly used for monopoly products or cost plus contracts and requires detailed records.
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Which cost price method assumes that the costliest materials are issued first and values the inventory at the lowest possible price?a)Specified Price Methodb)First-in First-out (FIFO) Methodc)Last-in First-out (LIFO) Methodd)Highest-in First-out (HIFO) MethodCorrect answer is option 'D'. Can you explain this answer?
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Which cost price method assumes that the costliest materials are issued first and values the inventory at the lowest possible price?a)Specified Price Methodb)First-in First-out (FIFO) Methodc)Last-in First-out (LIFO) Methodd)Highest-in First-out (HIFO) MethodCorrect answer is option 'D'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Which cost price method assumes that the costliest materials are issued first and values the inventory at the lowest possible price?a)Specified Price Methodb)First-in First-out (FIFO) Methodc)Last-in First-out (LIFO) Methodd)Highest-in First-out (HIFO) MethodCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which cost price method assumes that the costliest materials are issued first and values the inventory at the lowest possible price?a)Specified Price Methodb)First-in First-out (FIFO) Methodc)Last-in First-out (LIFO) Methodd)Highest-in First-out (HIFO) MethodCorrect answer is option 'D'. Can you explain this answer?.
Which cost price method assumes that the costliest materials are issued first and values the inventory at the lowest possible price?a)Specified Price Methodb)First-in First-out (FIFO) Methodc)Last-in First-out (LIFO) Methodd)Highest-in First-out (HIFO) MethodCorrect answer is option 'D'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Which cost price method assumes that the costliest materials are issued first and values the inventory at the lowest possible price?a)Specified Price Methodb)First-in First-out (FIFO) Methodc)Last-in First-out (LIFO) Methodd)Highest-in First-out (HIFO) MethodCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which cost price method assumes that the costliest materials are issued first and values the inventory at the lowest possible price?a)Specified Price Methodb)First-in First-out (FIFO) Methodc)Last-in First-out (LIFO) Methodd)Highest-in First-out (HIFO) MethodCorrect answer is option 'D'. Can you explain this answer?.
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