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The company definitely plans to sell the oldest inventory first; does this affect the inventory costing method? Why?

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Question added by Marie marshall
Date Posted: 2016/05/01
Deleted user
by Deleted user

this inventory costing method is called FIFO ( first in first out ) thus ending inventory and COGS for the period are the same regardless of whether the perpetual or periodic inventory accounting system is used so during inflation periods the gross profit is the highest .

KHALID HAMID SIDDIQUI
by KHALID HAMID SIDDIQUI , Assistant Manager , Toyota - Indus Motor Company

By selling oldest inventory first, the recently purchased inventory will be there in closing stock.

If the prices trend is increasing, the closing stock have higher cost. If the prices trend is decreasing, the closing stock have lower cost.  Therefore, the costing method effect the value of closing stock.

Ahmed Mohamed Ayesh Sarkhi
by Ahmed Mohamed Ayesh Sarkhi , Shared Services Supervisor , Saudi Musheera Co. Ltd.

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