CIM CIM Inventory Costing & Valuation

Question 1

Which inventory costing method assumes the first items purchased are the first items sold?

Accepted Answer

FIFO

Answer

LIFO

Answer

Weighted Average

Answer

Specific Identification

Question 2

Under LIFO during periods of rising prices, what effect does it have on reported net income compared to FIFO?

Accepted Answer

Lower net income

Answer

Higher net income

Answer

No effect on net income

Answer

Variable effect depending on volume

Question 3

The weighted average cost method calculates inventory cost by:

Accepted Answer

Dividing total inventory cost by total units available

Answer

Assigning actual cost to each unit

Answer

Using the most recent purchase price

Answer

Using the oldest purchase price on record

Question 4

Which inventory valuation method is prohibited under International Financial Reporting Standards (IFRS)?

Accepted Answer

LIFO

Answer

FIFO

Answer

Weighted Average

Answer

Specific Identification

Question 5

The Lower of Cost or Net Realizable Value (LCNRV) rule requires a write-down when:

Accepted Answer

Historical cost exceeds net realizable value

Answer

Market value exceeds historical cost

Answer

Inventory turns fall below the industry average

Answer

Storage costs rise unexpectedly

Question 6

What does the inventory turnover ratio measure?

Accepted Answer

How many times inventory is sold and replaced in a period

Answer

Frequency of stockout events

Answer

Number of purchase orders issued per year

Answer

Cost of carrying inventory as a percentage of sales