Question

Which of the following forms of inventory valuation provides the greatest flexibility in managing inventory?

A) Specific identification
B) First-in, first-out (FIFO)
C) Last-in, first-out (LIFO)

Answer 1

Step-by-step explanation:

The form of inventory valuation that provides the greatest flexibility in managing inventory is:

A) Specific identification.

Specific identification allows for the identification and tracking of individual inventory items and their associated costs. This method provides the most precise and detailed information about each item's value, allowing for better control and management of inventory. It offers flexibility in pricing items based on their unique characteristics, such as serial numbers, batch numbers, or other distinguishing features.

In contrast, FIFO (First-in, first-out) and LIFO (Last-in, first-out) are cost flow assumptions that do not provide the same level of flexibility as specific identification. FIFO assumes that the first items purchased or produced are the first ones sold, while LIFO assumes that the last items purchased or produced are the first ones sold. These methods can be useful in certain scenarios but do not offer the same level of precision and flexibility as specific identification.