Final answer:
Inventories in a company's financial statements can be reported at standard costs. Budgeted costs are not used for inventory valuation in financial statements but for planning and budgeting purposes. The correct option is (2).
Step-by-step explanation:
In the context of financial accounting for businesses, inventories can be valued and reported in a company's financial statements using different costing methods. The question is asking whether the inventories can be reported at budgeted costs, standard costs, or both.
According to accounting principles, inventories are typically reported using historical cost, which can be further categorized into specific costing methods such as First-in, First-out (FIFO), Last-in, First-out (LIFO), or average cost method.
However, some companies may use standard costs, which are predetermined unit costs that are used as a measure of efficiency, for the valuation of inventories. Standard costs are commonly used in the manufacturing sector where the costs can be estimated with a high degree of accuracy.
Budgeted costs, on the other hand, refer to the projected costs based on the planned financial activities and are generally used for planning and control purposes rather than the valuation of inventories.
Therefore, the most accurate answer from the given options would be that a company's financial statements may report inventories at standard costs. Budgeted costs are not typically used for inventory valuation in financial statements.