Which of the following inventory cost flow assumptions is not in accord with the physical flow of merchandise in most businesses?
A) LIFO.
B) FIFO.
C) Specific identification.
D) Average.

Question

Quizplus · Accepted Answer

LIFO (last-in, first-out) assumes that the last items purchased or produced are the first ones sold, even if they are not the actual items physically sold. This method is therefore not in accord with the physical flow of merchandise in most businesses, as it assumes that the oldest inventory items are the ones remaining at the end of the period. FIFO (first-in, first-out) and specific identification assume a physical flow that better matches the actual flow of merchandise in most businesses. Average cost assumes an average cost per unit of inventory, calculated based on the total cost of goods available for sale divided by the total number of units available for sale.

Which of the Following Inventory Cost Flow Assumptions Is Not