Inventory cost formulas such as FIFO and average deal more with the flow of costs than with the flow of goods.

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FIFO (first-in, first-out) and average cost methods assign costs to inventory based on the order in which they were incurred, regardless of the physical flow of goods. This means that the cost of goods sold and ending inventory can be calculated based on the movement of costs rather than the movement of goods.

Inventory Cost Formulas Such as FIFO and Average Deal More