FIFO income typically is less realistic compared to the net income under weighted-average cost.

Question

Quizplus · Accepted Answer

FIFO assumes that the first items purchased are also the first items sold, which may not be the case in reality. This can lead to inventory and cost distortions, resulting in higher reported income. Weighted-average cost is a more realistic method that takes into account the costs of all items in inventory and assigns an average cost per unit.

FIFO Income Typically Is Less Realistic Compared to the Net