In which of these inventory approaches is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold?
A)LIFO
B)FIFO
C)Specific identification
D)Average cost

Question

Quizplus · Accepted Answer

In the specific identification method, the actual cost of a particular inventory item sold can be determined and matched with its revenue to determine the cost of goods sold. Therefore, it is important to determine the actual cost of the inventory item being sold. In LIFO, FIFO, and average cost methods, the cost of goods sold is calculated based on assumptions about which inventory items were sold first or the average cost of all inventory items, rather than the specific cost of each item sold.

In Which of These Inventory Approaches Is It Important to Determine