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  • Short Question: Specific ID vs. FIFO vs. Average Cost

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    Sina Rahimi
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    The document compares and contrasts three inventory costing methods: specific identification, FIFO (first-in first-out), and average cost. It indicates that specific identification tracks the actual physical flow of goods and must be used for unique, non-homogeneous items. FIFO approximates the physical flow of most retailers and results in ending inventory including the most current costs. Average cost smoothes the effects of price changes and results in cost of goods sold including more current costs and most closely matching costs and revenues on the income statement.

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    The document compares and contrasts three inventory costing methods: specific identification, FIFO (first-in first-out), and average cost. It indicates that specific identification tracks the actual physical flow of goods and must be used for unique, non-homogeneous items. FIFO approximates the physical flow of most retailers and results in ending inventory including the most current costs. Average cost smoothes the effects of price changes and results in cost of goods sold including more current costs and most closely matching costs and revenues on the income statement.

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    © All Rights Reserved
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    13 views1 page

    Short Question: Specific ID vs. FIFO vs. Average Cost

    Uploaded by

    Sina Rahimi
    The document compares and contrasts three inventory costing methods: specific identification, FIFO (first-in first-out), and average cost. It indicates that specific identification tracks the actual physical flow of goods and must be used for unique, non-homogeneous items. FIFO approximates the physical flow of most retailers and results in ending inventory including the most current costs. Average cost smoothes the effects of price changes and results in cost of goods sold including more current costs and most closely matching costs and revenues on the income statement.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Short Question: Specific ID vs. FIFO vs.

    Average cost

    Indicate which cost formula (specific identification, FIFO, or average cost) is most
    closely linked to each of the following statements:

    • Smoothes the effects of price changes. Answer: average cost

    • Cost of goods sold includes more current costs. Answer: average cost

    Tracks the actual physical flow of goods. Answer: specific identification

    • Ending inventory includes the most current costs (closest to replacement

    costs). Answer: FIFO

    • Most closely matches costs and revenues on the income statement.

    Answer: specific identification

    • Must be used if the goods being sold are unique, non-homogeneous items.

    Answer: specific identification

    • Approximates the physical flow of most retailers. Answer: FIFO

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