PRC-1 · Chapter 7 · Question 53 of 100
What is the underlying assumption of the First in, First out (FIFO) cost formula?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The inventory items which are sold or consumed are those acquired longest ago.
Explanation
FIFO assumes that the first goods purchased or manufactured are the first ones to be sold or consumed, meaning the closing inventory consists of the most recently acquired items.
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