Of the three widely used inventory costing methods (FIFO, LIFO, and average), the FIFO method of costing inventory is based on the assumption that costs are charged against revenues in the order in which they were incurred.

Question

Quizplus · Accepted Answer

The statement is correct. FIFO stands for "first in, first out," and it assumes that the oldest inventory items are sold first. Therefore, the cost of goods sold reflects the cost of the oldest units, and the ending inventory reflects the cost of the newest units. This method is based on the assumption that costs flow through the income statement in the order they were incurred.

Of the Three Widely Used Inventory Costing Methods (FIFO, LIFO