The inventory costing method assumes that the unit sold is the most recent unit purchased referred to as Specific Identification
Explain about inventory costing method.
An organization employing the average cost inventory costing approach would allocate costs to goods sold by averaging the expenses of purchasing inventory.
- Instead of charges connected to the moment of purchase or the age of the goods, this average cost is applied to each item of inventory.
By definition, the average cost/weighted average for the cost of goods sold must be adjusted each time a product is sold or added to inventory in order to be correct.
- This is frequently done automatically by the inventory management system of a business.
- The majority of enterprises that use the average cost technique sell or distribute non-perishable commodities in a non-sequential way.
- In these processes, it is common for fresh stock to be mixed in with the older stock.
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