WK 3 Discussion 2 Merchandise Inventory Methods.docx -...

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Explain the four merchandise inventory methods and provide an example for each. There are four methods used to determine inventory costs, those methods are; specific identification, first-in, first-out (FIFO), last-in, first-out (LIFO), & weighted average cost. Each of these methods determines the approximated flow of inventory costs in a business and is used to determine the amount of goods sold and the ending inventory results (Miller-Nobles, Mattison, & Matsumura, 2018). Specific Identification: This method is exactly how it sounds, it takes the specific cost of each inventory. This method tracks each individual inventory item separately as well as costs, this method tracks that item based on the movement of specific, identifiable inventory items in and out of stock. Example: Purchases Date Quantity Unit Cost Total Cost Sept. 1 2 nd 10 Units X $15 $150 3 rd 25 Units X 100 $2,500 6 th 9 units X $35 $ 315 First-in, first-out (FIFO): With the first in first out method the cost of goods purchased first (first-in) is the cost of goods sold first (first-out). An example of this would be if 100 items were

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