Inventory Costing Methods Homework Help

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Inventory Costing Methods Assignment Help

Here is a List of the Different Inventory Costing Methods by Experts

There are different types of inventory costing methods available, and you cannot actually consider any single inventory method to be the best. It is very important for small businesses to find out the best inventory method that is suitable for accounts of their type of business.

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Inventory costing methods

  • First in and first out

This is the method which is mostly followed by purchasing cycle of the real world. It actually parallels flow of inventory goods from purchasing to sales in a number of businesses. In this method,old costs are allocated to the sold inventory items irrespective of whether these items were actually bought at that cost.

For example,β€œif a particular company buys a total of 10 widgets at 20$ each and then buys another 8 widgets at 19$ each then the company will sell the first 10 widgets at 20$ each and then sell the rest 8 at 19$ each.”

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  • Last in first out

This method is completely the opposite of first in first out method. Here products which are added to the company inventory last are sold first.

  • Average cost method

In this method, an inventory cost is calculated on the basis of the cost of inventory purchase. This inventory costing method is most suitable for those companies which sell perishable goods and do not follow any specific order when selling these goods. The best example of this type of business is the video games retailers. This type of inventory costing can definitely be considered to be more reliable and steadier than other methods.

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