A company that uses FIFO costing method is going live.
Which transaction best captures the time-based nature of inventory cost?
A company that uses FIFO costing method is going live.
Which transaction best captures the time-based nature of inventory cost?
When using FIFO (First-In, First-Out) costing method, the time-based nature of inventory cost is best captured by the transaction that reflects the fulfillment or sale of inventory items. An Item Fulfillment transaction records which specific inventory items are leaving the inventory based on the order they were entered, ensuring the cost of older items is matched against current sales. This reflects the true nature of FIFO costing.
Adjust Inventory - D.
B has to be the right answer. Ex: Monday, you buy 20 calculators at $10 each and place them in inventory. Tuesday, you buy 20 calculators at $15 each and place them in inventory. Wednesday, you sell 5 calculators to a customer. For FIFO method, the 5 calculators post a cost of $10 each because that is the cost of the first calculators added to inventory and it best captures the time based nature of inventory cost