
Concept explainers
The evaluation or estimation of monetary worth of inventory bought in order to ascertain the cost of goods sold is termed as inventory valuation or inventory costing. Inventory valuation helps to ascertain the cost of goods sold and the cost of closing inventory.
There are majorly four methods used for costing of inventory:
- First in, first out method;
- Last in, first out method
- Weighted average costing method
- Specific identification method.
First in, first out method:
In first in first out method, also known as FIFO method, the inventory which was bought first will be the first one to be taken out.
Last in, first out method:
In case of last in, first out, also known as LIFO method, the inventory which was bought in the last will be taken out first.
Weighted average cost method:
In this method the weighted average cost is evaluated after any purchases have been made and transactions are recorded as when purchase or sales take place.
Specific identification method:
Under this method, a continuous track of the inventory needs to be maintained and the inventory cost is evaluated at the time of purchase, on the basis of unique identity which also helps in the valuation of the ending inventory as well as the cost of goods sold. This method is generally used when the company is involved in limited expensive goods which are easily identifiable.
To Identify: The inventory costing method which best to describe the given statements.
1.

Want to see the full answer?
Check out a sample textbook solution
Chapter 5 Solutions
GEN COMBO LOOSELEAF FINANCIAL AND MANAGERIAL ACCOUNTING; CONNECT ACCESS CARD
- Perry Industries is preparing its direct labor budget for the next two months. Each unit of output requires 0.85 direct labor hours. The direct labor rate is $12 per direct labor hour. The production budget calls for producing 7,200 units in June and 7,000 units in July. The company guarantees its direct labor employees a 40-hour paid work week, and with the current workforce, this means they are committed to paying for at least 5,900 labor hours per month, even if there isn't enough work to occupy all that time. What would be the total combined direct labor cost for the two months?arrow_forwardWhat was the company's accrual basis net income for the month ?arrow_forwardI am looking for help with this financial accounting question using proper accounting standards.arrow_forward
- Financial accountingarrow_forwardPlease solve this question General accounting and step by step explanationarrow_forwardA firm sells 3,800 units of an item each year. The carrying cost per unit is $3.56 and the fixed costs per order are $84. What is the economic order quantity? (Please round units to the nearest whole number)arrow_forward
- Financial Accountingarrow_forwardFinancial accounting questionarrow_forwardElba Industries produces a single product: solar-powered lanterns for outdoor use. The budget going into the current year anticipated a selling price of $72 per unit. Due to market competition, the company had to reduce the selling price by 12% during the year. Budgeted variable costs per unit are $45, and budgeted total fixed costs are $180,000 for the year. The anticipated sales volume for the year was 15,000 units. Actual sales volume was 6% lower than budget. What was the sales price variance for the year?arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





