Question

Describe the allocation of inventoriable costs may be made under any of the following assumptions as to the flow of costs (a) first-in, first-out (FIFO), (b) last-in, first-out (LIFO), or (c) average cost.

Answer 1

Answer:

A. First in first out (FIFO) is the framework under which the most seasoned stock is evacuated the first and the freshest stock, last.

Thus, while ascertaining the expense of merchandise sold and the benefit of shutting stock,

the most seasoned stock staying in the distribution center will be assessed.

Subsequently, it more often than not so happens that the expense of products sold esteem is lower when contrasted with LIFO and the end stock is higher and in this way,

the benefit and resources figure for the present year appear to be solid.

Be that as it may, in the following bookkeeping time frame it levels out in contrast with alternate strategies for stock account frameworks.

FIFO is best in the midst of rising costs, with the goal that the costs recorded are low and pay is higher.

B. Last in first out (LIFO) is the other way around of FIFO wherein,

the end stock esteem is lower and cost of products sold is high in this way,

in the present bookkeeping time frame,

the benefit and resources figure is lower when contrasted with while receiving FIFO.

LIFO is ideal in times when charge rates are high on the grounds that the costs appointed will be higher and pay will be lower.