Which statement best explains the FIFO cost flow assumption?
A)A method that uses the most recent costs in the calculation of cost of sales.
B)A method that uses the cost of goods available for sale divided by the number of units available for sale.
C)A method that assigns costs to inventories and cost of sales based on actual costs of each item.
D)A method that uses the oldest costs in the calculation of cost of sales.

Question

Quizplus · Accepted Answer

The FIFO (first-in, first-out) cost flow assumption assumes that the first items purchased or produced are the first items sold, so the cost of goods sold is calculated using the oldest costs first. Therefore, option D is the correct statement.

Which Statement Best Explains the FIFO Cost Flow Assumption