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

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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Sina Rahimi
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51 views1 page

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

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.

Uploaded by

Sina Rahimi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on 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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