Which cost determination method smoothes the effects of price changes?
A) Average cost.
B) FIFO.
C) Lower of cost and net realizable value.
D) Specific identification.

Question

Quizplus · Accepted Answer

Average cost smoothes the effects of price changes by calculating the cost per unit based on the average of all units purchased. This method is particularly useful in times of price volatility as it eliminates the sharp jumps in cost that may occur with other methods such as FIFO or specific identification.

Which Cost Determination Method Smoothes the Effects of Price Changes