The four methods used to determine merchandise inventory costs are:
method, First-in First-out (FIFO), Last-in First-out (LIFO), and the Weighted Average Cost
Each one of these methods approximates the flow of inventory costs except for the
specific identification method and they are used to determine the amount of cost of goods and
ending merchandise inventory (Miller-Nobles, Mattison, Matsumura, 2018).
Specific identification method
is an inventory costing method based on the specific costs of each
This method is used when a company wants to know exactly which item was sold and the
cost, usually for businesses that sell unique items.
Unit Cost ea.
First-in First-out (FIFO)
is the first costs into inventory are the first costs out to costs of goods
sold and the inventory is based on the most recent purchases.
For example, if the business
purchases 10 units at $100 on June 1