In which of these inventory cost flow assumptions is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold?
A) LIFO.
B) FIFO.
C) Specific identification.
D) Weighted average.

Question

Quizplus · Accepted Answer

Specific identification is the only inventory cost flow assumption where the actual cost of a particular inventory item being sold must be determined in order to calculate cost of goods sold. With specific identification, each inventory item is assigned a specific cost, allowing for the exact cost of the item sold to be identified and included in cost of goods sold. This is in contrast to FIFO, LIFO, and weighted average, where cost of goods sold is calculated based on assumptions about the order in which inventory items were purchased or produced.

In Which of These Inventory Cost Flow Assumptions Is It