An assumption about cost flow is necessary:

a. because it is required by the income tax regulation

b. even when there is no change in the purchase price on inventory

c. only when the flow of goods cannot be determined

d. because prices usually change, and tracking which units have been sold is difficult

Question

Business

Manuel Zuniga

18 October, 03:26

An assumption about cost flow is necessary:

a. because it is required by the income tax regulation

b. even when there is no change in the purchase price on inventory

c. only when the flow of goods cannot be determined

d. because prices usually change, and tracking which units have been sold is difficult

+5

Answers (2)

Know the Answer?

Kristin Malone · Answer 1

d. because prices usually change, and tracking which units have been sold is difficult

Explanation:

Cost flow assumptions is necessary because there is constant change of cost which is the experience of companies, also due to inflation. If there is a stable cost, cost flow would be inconsequential

Agustin Reilly · Answer 2

The correct answer is letter "D": because prices usually change, and tracking which units have been sold is difficult.

Explanation:

Costs flow assumptions are the result of many factors. Inflation, changes in costs as a result of changing prices, and inventory sales tracking per unit are the most important. Cost flow assumptions analyze how costs are removed from a firm's inventory and reported in the account of Cost of Goods Sold using costing methods such as the FIFO (First-in, First-out), LIFO (Last-in, First-Out), and the Weighted Average.