FIFO and LIFO Are the Two Most Common Cost Flow

question 88

Essay

FIFO and LIFO 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 LIFO 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:

Original Data

The initial dataset collected or received before any processing, manipulation, or analysis has been done.

Independent Events

Events whose occurrence or outcome is not influenced by the occurrence or outcome of another event.

P(A and B)

The probability that both events A and B occur.

P(A)

The probability of event A occurring, an elementary concept in probability and statistics.