In periods of rising prices, _____ method of inventory valuation will result in production being relatively undercharged.
First in First Out
The correct answer is option 1. The "First in First Out" (FIFO) method of inventory valuation results in the production being relatively undercharged in times of rising prices, as older (cheaper) inventory is used first, leaving the more expensive items in inventory.
Similar Questions
Valuing inventory at cost or net realizable value is based on which principle?
Which of the following statements is/are correct?
Statement-1: In periods of rising prices, the cost of production is lower in the FIFO method.
Statement-2: In periods of falling prices, the ending inventory is valued in the FIFO method at a price lower than that in case of the LIFO method.
Which of the following methods does NOT consider historical cost of inventory?
Under ______ method of Inventory valuation, the issues of materials are made at the price of materials or goods which have been ordered but not yet received.
If a firm purchases 100 units of goods on 1st Jan. @ Rs 4 p.u; 200 units on 8th Jan. @ Rs.5 p.u, 200 units on 24th Jan. @ Rs.6 p.u, and sold 200 units on 31st Jan, what will be the value of inventory sold on 31st Jan. according to the Weighted Price method when the firm follows Periodic Inventory System?
Important Questions from Inventory
Match List I with List II:
List I (Methods of Inventory Control) List II (Explanation) (A) JIT system (I) Divide the items into the categories in the descending order of their usage rate. (B) ABC Analysis (II) Divides items into categories in the descenting order of their critical use. (C) FSND Analysis (III) Inventory arrive to the manufacturing sites just few hours before they are put to use (D) VED Analysis (IV) The items of inventory are classified according to value of usage. Choose the correct answer from the options given below:
Which statement is false with reference to dead stocks of a bank?
- The principle of inventory valuation - "cost or net realisable value, whichever is lower" is based on :
- Which one of the following costs is generally not included in computing the cost of inventory?
Valuing inventory at cost or net realizable value is based on which principle?
