The inventory valuation method that tends to smooth out erratic changes in costs is:
A) FIFO.
B) Weighted average.
C) LIFO.
D) Specific identification.
E) WIFO.

Question

Quizplus · Accepted Answer

Weighted average takes into account all units purchased and their respective costs, which tends to smooth out any volatile changes in costs. It is a more stable valuation method compared to FIFO and LIFO, which rely on the timing of purchases and can result in significant fluctuations in inventory valuation. Specific identification is not a reliable option for smoothing out cost changes as it assigns specific costs to specific items, while WIFO (weighted inventory fly-out) is not a recognized inventory valuation method.

The Inventory Valuation Method That Tends to Smooth Out Erratic