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The inventory costing methods are based on the type of business industry you are in. For example,
LIFO (Last in, First Out) can be usually used in make to stock item such as heavy equipment, construction, and slow moving industries, where their is time storage to defend against demand fluctuations
FIFO (First In, First Out) can be used in consumer goods, manufacturing, and retail industry, where their is no time for storage due to product attributes
Weighted Average: can be used in industries such brick laying, clothing and garments, sea food industries, where there's no time to assign specific cost to product due to similarity of attributes
Specific Unit Cost: can be used in industries such as electronics, technology, and innovation, where product features differ based on characteristics
Therefore, each industry is different and uses different inventory method.
Organizations used different method. But mostly used method is Average Cost Method for Inventory Costing.
I think the average cost method sounds like the most sensible inventory cost method. That way you can get an idea of the average value of your product, since the cost of raw materials does change over time. However, that doesn't change how much it cost to make the good at the time they were made. I think the average cost method takes those factors into account.
I suppose it doesn't give you a break on your taxes or make your company look extra-profitable like the other two methods. But it seems like the best way to figure out the actual cost of doing business
There4 methods which may be used for costing which are : -
