Which of the following businesses is most likely to use the specific identification cost flow method?

• A. A gas station selling fuel
• B. A grocery store selling canned vegetables
• C. A hardware store selling nails in bulk
• D. A jewelry store selling unique diamond rings

Answer: (D)

Verified step by step guidance

1. Understand the specific identification cost flow method: This method tracks the exact cost of each individual item in inventory and assigns it to the cost of goods sold when the item is sold. It is typically used for businesses dealing with unique, high-value items.
2. Analyze the nature of the businesses listed: A gas station sells fuel in bulk, which is not unique and cannot be individually tracked. A grocery store sells canned vegetables, which are identical and not individually distinguishable. A hardware store sells nails in bulk, which are also identical and not unique.
3. Consider the jewelry store: Jewelry stores often sell unique, high-value items like diamond rings. Each ring can be individually identified and tracked, making the specific identification method suitable for this type of business.
4. Match the characteristics of the specific identification method to the jewelry store: Since the jewelry store deals with unique items, it can assign the exact cost of each diamond ring to the cost of goods sold when the ring is sold.
5. Conclude that the jewelry store is the most likely business to use the specific identification cost flow method because it deals with unique, high-value items that can be individually tracked.