FIFO and Average-Cost Are the Two Most Common Cost Flow

question 194

Essay

FIFO and average-cost are the two most common cost flow assumptions made in costing inventories. The amounts assigned to the same inventory items on hand may be different under each cost flow assumption. If a company has no beginning inventory, explain the difference in ending inventory values under the FIFO and average-cost cost bases when the price of inventory items purchased during the period have been (1) increasing, (2) decreasing, and (3) remained constant.

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Definitions:

Truth Table

A mathematical table used in logic to determine the truth or falsity of a compound proposition based on the truth values of its components.

Atomic Sentences

The simplest type of sentences in logic, containing no logical connectives, and expressing a single idea.

Truth Table

A table used in logic to compute and illustrate the possible truth values of logical expressions based on their components.

Atomic Sentences

Simple statements that contain no logical operators and cannot be broken down into simpler statements.