Final answer:
Valuation methods comparison involves comparing different methods used to value inventory to determine the most accurate method for calculating inventory value.
Step-by-step explanation:
Valuation methods comparison
In the context of perpetual inventory system shrinkage, valuation methods comparison refers to comparing different methods used to value inventory in order to determine the most accurate method for calculating the value of inventory. This is important because the value of inventory affects important financial metrics, such as cost of goods sold and gross profit.
Some common valuation methods include FIFO (first-in, first-out), LIFO (last-in, first-out), and weighted average cost. FIFO assumes that the first units purchased are the first ones sold, while LIFO assumes that the last units purchased are the first ones sold. Weighted average cost calculates the cost of goods sold based on the average cost of all units purchased.