Which method of inventory pricing best approximates specific identification of the actual flow of costs and units in most manufacturing situations?

Question

Quizplus · Accepted Answer

First-in, first-out (FIFO) is the method of inventory pricing that best approximates specific identification of the actual flow of costs and units in most manufacturing situations. This is because in a manufacturing situation, it is important to know the cost of the oldest inventory items that were sold first, as opposed to more recent items. This method assumes that the oldest inventory items are sold first and the cost of those items is used for cost of goods sold, which approximates the actual flow of costs in a manufacturing situation.

Which Method of Inventory Pricing Best Approximates Specific Identification of the Actual