Question

Which inventory costing method assumes that the inventory's costs flow out in the same order the goods are received?

A- LIFO
B- Weighted average
C- FIFO

Answer 1

The inventory costing method that assumes that the inventory's costs flow out in the same order the goods are received is FIFO.

Step-by-step explanation:

The inventory costing method that assumes that the inventory's costs flow out in the same order the goods are received is FIFO, which stands for First-In, First-Out.

Under the FIFO method, the oldest inventory costs are assumed to be the first ones to flow out of the inventory when goods are sold or used. This means that the cost of inventory is matched with the revenues generated by the sale of those goods.

For example, let's say a company receives goods throughout the year at varying costs. When the company sells those goods, it assumes that the costs of the goods sold are the ones associated with the oldest inventory received, while the remaining inventory on hand is assumed to be at the most recent costs.