Approximating the physical ﬂow of inventory is not important when selecting an inventory cost formula.

Question

Quizplus · Accepted Answer

Approximating the physical flow of inventory is important when selecting an inventory cost formula as it determines the cost of goods sold, ending inventory, and ultimately impacts the financial statements. Different cost formulas such as FIFO, LIFO, and average cost will result in different inventory valuations and cost of goods sold depending on the method chosen to track the physical flow of inventory.

Approximating the Physical ﬂOw of Inventory Is Not Important When