Inventory - Inventory Cost Flow Assumptions Inventory cost...

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Inventory Cost Flow Assumptions Inventory cost flow assumptions include (a) specific identification, (b) average cost, (c) first-in, first-out (FIFO), (d) last-in, first-out (LIFO), and (e) dollar-value LIFO. It should be remembered that these assumptions relate to the flow of costs and not the physical flow of inventory items into and out of the company. Specific identification calls for identifying each item sold and each item in inventory. The costs of the specific items sold are included in the cost of goods sold, and the costs of the specific items on hand are included in the inventory. The average cost method prices items in the inventory on the basis of the average cost of all similar goods available during the period. FIFO Use of the FIFO inventory method assumes that the first goods purchased are the first used or sold. In all cases where FIFO is used, the inventory and cost of goods sold would be the same at the end of the month whether a perpetual or periodic system is used. A major advantage of the FIFO
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This note was uploaded on 10/07/2010 for the course FIN 3162N taught by Professor Spencer during the Spring '10 term at Dowling.

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Inventory - Inventory Cost Flow Assumptions Inventory cost...

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