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Cost flow

What are the different inventory cost flow assumptions? How does a company determine what cost flow assumption they should use? How may the choice of cost flow assumptions affect the company's cost of goods sold and ending inventory balance?

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Questions: What are the different inventory cost flow assumptions? How does a company determine what cost flow assumption they should use? How may the choice of cost flow assumptions affect the company's cost of goods sold and ending inventory balance?

What are the different inventory cost flow assumptions?

Inventory cost flow assumptions is used by organizations to ascertain the cost of goods sold and ending inventory over a specific accounting period. The key word in the concept is "assumption", organizations for example those into manufacturing and distribution industry usually make assumptions that certain goods produced will be sold over a period of time while a certain amount of goods will likely be maintained in inventory. The assumptions are primarily used for financial and tax purposes. The different inventory cost flow assumptions include:
? FIFO (first-in; first-out): This cost flow assumption method is commonly used by ...

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