Question

Which inventory costing method most closely approximates current cost for each of the following:

EI COGS
A) FIFO FIFO
B) FIFO LIFO
C) LIFO FIFO
D) LIFO LIFO

Answer 1

The FIFO (First-in, First-out) inventory costing method most closely approximates current cost.

Correct option is B.

Step-by-step explanation:

The inventory costing method that most closely approximates current cost for each of the following scenarios is FIFO (First-in, First-out).

Under FIFO, the assumption is that the goods or items purchased or produced first are the ones sold or used first. This method leads to a more accurate representation of the current cost because it matches the most recent costs with the inventory that remains.

For example, for scenario B (FIFO LIFO), the more recent costs are matched with the ending inventory, assuming that the older costs were already used up or sold.