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LIFO ADVANTAGE

Put the recent cost into COGS, better_____________________, thus better measure of _________________

User Cardeol
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Final answer:

LIFO provides an advantage in matching recent costs with revenues for a more accurate reflection of current earnings. It is a valuable part of cost measurement, alongside the breakdown of total costs into various specific cost types.

Step-by-step explanation:

The use of LIFO, which stands for Last-In, First-Out, as an inventory valuation method, has the potential advantage of matching the most recent costs with the current revenues.

This approach can lead to a better matching of costs with revenues, thus providing a better measure of current and period earnings.

The recent costs that are more likely to be similar to current market prices are included in the Cost of Goods Sold (COGS), which could reflect a more accurate cost of production under certain economic conditions such as inflation.

Breaking down total costs into fixed cost, marginal cost, average total cost, and average variable cost is a useful practice for firms. Each statistic provides different insights, which can be critical in a business environment where costs must be measured and controlled.

User Pankaj Gupta
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