APICS Certified Supply Chain Professional (CSCP) — Question 318

The most useful inventory costing method which enables purchase price variance analysis is:

Answer options

• A. average costing.
• B. standard costing.
• C. last in first out (LIFO) costing.
• D. first in first out (FIFO) costing.

Correct answer: B

Explanation

Standard costing is the most useful method for purchase price variance analysis because it allows businesses to set expected costs and compare them to actual costs, highlighting variances. Average costing does not focus on variances, while LIFO and FIFO methods prioritize inventory flow rather than cost analysis.