Inventory Cost Flow.docx - First in First out FIFO – the...

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First in, First out FIFO – the goods first purchased are first sold The inventory is thus expressed in terms of recent or new prices while the cost of goods sold is representative of the earlier or old prices Favors the statement of financial position in that the inventory is stated at current replacement cost There is improper matching of cost against revenue because goods sold are stated earlier In period of inflation, FIFO method would result to the highest net income In period of deflation, FIFO method would result to the lowest net income Weighted Average : Total Cost / Unit Inventory Cost : (Units – Sales) x Weighted Average Moving Average Method – weighted average method in conjunction with perpetual system Calculated in periodic basis or each additional shipment is received Weighted average unit must be computed for every purchase or purchase returns Last in, First Out – the goods last purchased are first sold
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