The specific identification method of costing inventories is used when the
A) physical flow of units cannot be determined.
B) company sells large quantities of relatively low cost homogeneous items.
C) company sells large quantities of relatively low cost heterogeneous items.
D) company sells a limited quantity of high-unit cost items.

Question

Quizplus · Accepted Answer

The specific identification method is most appropriate when a company sells a limited quantity of high-unit cost items because it involves identifying and assigning the actual cost of each individual item to its specific unit. It would not be practical or necessary to use this method for large quantities of relatively low-cost items, whether they are homogeneous or heterogeneous. Additionally, if the physical flow of units cannot be determined, another costing method such as average cost or FIFO would be more suitable.

The Specific Identification Method of Costing Inventories Is Used When