Question

How do you determine inventory cost?

Answer 1

Inventory can be valued using different methods such as LIFO, FIFO and weighthed average. The FIFO method assumes that stock which is first purchased is sold out first.The physical stock of goods is then valued accordingly. Under LIFO method, the inventory which is last purchased is assumed to be sold first. So the stock is valued as per the oldest price of purchases. As per the weighted average method, the stock is valued according to the weighted average of all opening stock and purchases.