FIFO and LIFO Are the Two Most Common Cost Flow

question 60

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 cost of inventory items purchased during the period have been (1) increasing, (2) decreasing, and (3) remained constant.

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Definitions:

Reproduction

Processes by which organisms produce offspring.

Rodents

A large order of mammals characterized by two continuously growing incisors in the upper and lower parts of their mouth, which must be kept short by gnawing.

Teeth

Hard, calcified structures in the jaws of many vertebrates, used for biting, chewing, and sometimes for defense.