Which method of inventory valuation is being described?
Characteristic FIFO LIFO AVCO
Potentially out of date valuation on issues.
The valuation of inventory rarely reflects the actual
purchase price of the material.
Potentially out of date closing inventory valuation.
This inventory valuation method is particularly suited
to inventory that consist of liquid materials e.g. oil.
This inventory valuation method is particularly suited
to inventory that has a short shelf life e.g. dairy products.
This inventory valuation method is suited to a wheat farmer
who has large silos of grain. Grain is added to and taken from
the top of these silos.
In times of rising prices this method will give higher profits.
In times of rising prices this method will give lower profits.
In times of rising prices this method gives a middle level of
profits compared to the other two.
Issues are valued at the most recent purchase cost.
Inventory is valued at the average of the cost of purchases.
Inventory is valued at the most recent purchase cost.