Question

Which cost-flow method - FIFO, Specific, or Moving Weighted Average - will be more suitable to record inventories of a bakery that:

1. Has different types of ice cream sold at the same price
2. Has different types of cakes sold at different price

Answer 1

1. In first situation, Moving weighted average method should be used as different types of icecreams are sold at same price which means the price remains constant but the quantity differs .So the best method here is moving weighted average method.

2.In this situation , FIFO method should be used as this method is generally used by those industry whose inventory is kept for short demnad cycle or is perishable. They believe cakes prepared earliest should be marked as sold first in order to avoid spoilage & will also marks actual flow of food in the shop.