Which of the following inventory cost flow assumptions is not in accord with the physical flow of inventory in most businesses?

Question

Quizplus · Accepted Answer

LIFO (last-in, first-out) does not follow the physical flow of inventory in most businesses because it assumes that the last items purchased or produced are the first ones sold, meaning that newer inventory is sold before older inventory, even if the older inventory is physically still present in the warehouse. This is not how most businesses operate, as they tend to sell their inventory on a first-in, first-out (FIFO) basis or use specific cost identification. Weighted average cost assumes a blending of the costs of all items in inventory, which may be a more accurate representation of the physical flow of goods in a business.

Which of the Following Inventory Cost Flow Assumptions Is Not