Business Finance
inventory costing methods

Question Description

I’m studying for my Accounting class and don’t understand how to answer this. Can you help me study?

identify the primary benefits in using the costing method (LIFO, FIFO, and weighted average) that is used to record inventory. Explain least three (3) reasons that would lead each of your chosen companies to switch to a different costing method.

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Final Answer


It is an appropriate method for matching cost and revenue 

It is simple to operate easy to understand 

It facilitates complete recovery of material cost 

It is more suitablets when prices are rising


It is suitable for bulky materials with high unit prices 

It helps avoid deterioration and obsolescence

It is also easy to understand and operate

Value of closing stock materials will reflect current price 

Weighted average -

Less paperwork is required

Method is much more easi than the other two types 

Smoothness out fluctuations in support price

It assumes values of identical items as equal 

Most managers tend to choose different inventory costs for the following reasons -

1) Net income effect -Managers prefer to report higher income for their companies 

2) Income tax effects - Managers tend to want to pay as less as possible by as per laws .

3) easy to compute and faster preparation of report 

warrenc (144)
Boston College

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