Asked by Marianne Claire on May 10, 2024
Verified
A disadvantage of the FIFO method is that:
A) recent sales are not matched with recent costs.
B) the cost flow tends to follow the physical flow.
C) the figure for ending inventory is made up of current costs on the income statement.
D) None of the above is correct.
FIFO Method
An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for "First In, First Out."
- Analyze the advantages and disadvantages of different inventory valuation methods.
- Perceive the differentiation and application of FIFO, LIFO, weighted-average, and specific invoice procedures for inventory valuation.
Verified Answer
FM
Faisal MazlanMay 17, 2024
Final Answer :
A
Explanation :
The FIFO (First-In, First-Out) method matches older costs with recent sales, which can lead to discrepancies between the cost of goods sold and current market costs, especially in times of inflation.
Learning Objectives
- Analyze the advantages and disadvantages of different inventory valuation methods.
- Perceive the differentiation and application of FIFO, LIFO, weighted-average, and specific invoice procedures for inventory valuation.