• 1 Marks

MI – Nov 2023 – L1 – SA – Q1 – Costing Methods

Identifying a characteristic that is NOT associated with the LIFO materials pricing method.

Which of the following is NOT a characteristic of ‘Last-In-First-Out’ (LIFO) materials pricing method?
A. Results in many batches being only partly charged to production where a subsequent batch is received
B. It is an actual cost system
C. It is acceptable by the tax authorities
D. Administratively clumsy
E. Makes cost comparison between jobs difficult

C. It is acceptable by the tax authorities

Explanation:
LIFO is often not accepted for tax purposes in many countries, as it can distort the value of inventory and lead to tax advantages. The correct answer is based on this regulatory constraint, making option C incorrect as a characteristic of LIFO.

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