SIMULATION -
The _______________ cost method of pricing would carry an assets value on the financial statements as what it would currently cost, considering inflation.
Price-level adjusted historical cost
The cost method of pricing refers to a method used to value inventory and fixed assets on a company's financial statements. Under this method, the value of an asset is based on the cost of acquiring or producing it. This cost includes all direct and indirect costs incurred to bring the asset into its current condition and location for use, such as purchase price, shipping fees, installation costs, and so on.
The term that fills in the blank is "current." The current cost method is a specific application of the cost method that values assets at their current cost, taking into account the effects of inflation. In other words, the current cost method adjusts the historical cost of an asset to reflect the cost that would be incurred to replace it with a similar asset at current prices.
For example, suppose a company purchased a piece of machinery for $100,000 ten years ago. If the current inflation rate is 2% per year, the current cost of that machinery would be approximately $121,899. This value would be reflected on the company's financial statements under the current cost method of pricing.
The current cost method of pricing is commonly used for fixed assets that have a long useful life, such as buildings, machinery, and equipment. It is also used for inventory that has a long production cycle or that is subject to frequent price changes, such as raw materials and commodities.
Overall, the current cost method of pricing provides a more accurate representation of an asset's value on the financial statements and can help companies make informed decisions about investments, budgeting, and pricing strategies.