Understanding Inventory Valuation Methods

What does FIFO stand for in inventory management?

• First In, First Out

• First In, Last Out

• Fast In, Fast Out

• First Inventory, First Out

In the LIFO inventory method, which items are sold first?

• The oldest items

• The newest items

• The most expensive items

• The least expensive items

Which inventory method averages out the cost of all items available for sale during the period?

• FIFO

• LIFO

• Weighted Average Method

• Specific Identification

Which inventory system updates inventory records continuously?

• Periodic Inventory System

• Perpetual Inventory System

• Annual Inventory System

• Seasonal Inventory System

In a periodic inventory system, when is the inventory count updated?

• Continuously

• At the end of each day

• At the end of each accounting period

• At the beginning of each month

Which inventory valuation method might result in lower taxes during periods of rising prices?

• FIFO

• LIFO

• Weighted Average Method

• Specific Identification

How is the cost of goods sold (COGS) calculated under the FIFO method?

• Using the cost of the newest inventory

• Using the cost of the oldest inventory

• Using the average cost of all inventory

• Using the cost of the most expensive inventory

Which inventory method is most likely to match the actual physical flow of goods in a grocery store?

• FIFO

• LIFO

• Weighted Average Method

• Specific Identification

What is a potential disadvantage of using the LIFO method?

• It may not reflect the actual physical flow of goods.

• It results in higher taxes during inflation.

• It is more complex to implement than FIFO.

• It always results in higher net income.

In the weighted average method, how is the average cost per unit calculated?