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Question 18QS_5

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Financial & Managerial Accounting
Found in: Page 261
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Identify the inventory costing method best described by each of the following separate statements. Assume a period of increasing costs.

____5. The preferred method when each unit of product has unique features that markedly affect cost.

Specific Identification Method.

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Step by Step Solution

Definition of Merchandise

The goods bought and sold by a trading business entity are known as merchandise. It is considered an asset by the business entity.

Fill in the Blank

Specific Identification Method. The preferred method is when each unit of product has unique features that markedly affect cost.

Explanation: The items are not grouped under the specific identification method; instead, business entities track each item in the inventory and allocate costs accordingly. Therefore, this method proves to be efficient for calculating the cost of merchandise when each unit has unique features.

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