Which of the following companies would be most likely to utilize the specific identification method for inventory valuation?

• A. A hardware store selling bulk nails and screws
• B. A grocery store selling thousands of identical food items
• C. A luxury car dealership selling high-value, unique vehicles
• D. A fast-food restaurant with standardized menu items

Answer: (C)

Verified step by step guidance

1. Understand the specific identification method: This inventory valuation method tracks each individual item in inventory and assigns its specific cost to the cost of goods sold when sold. It is typically used for high-value, unique, or easily distinguishable items.
2. Analyze the characteristics of each company: Consider whether the inventory items are unique, high-value, or easily distinguishable, as these are key factors for using the specific identification method.
3. Evaluate the hardware store: Bulk nails and screws are low-value, identical items, making it impractical to use the specific identification method.
4. Evaluate the grocery store: Thousands of identical food items are standardized and low-value, so the specific identification method is not suitable here.
5. Evaluate the luxury car dealership: High-value, unique vehicles are ideal for the specific identification method because each car can be tracked individually with its specific cost.