Which method is typically used to assign costs to inventories that are interchangeable?
Understand the Problem
The question is asking about the method used to assign costs to interchangeable inventories, specifically seeking to identify the commonly used method among the options provided.
Answer
FIFO or weighted average cost formulas.
The final answer is FIFO or weighted average cost formulas.
Answer for screen readers
The final answer is FIFO or weighted average cost formulas.
More Information
The FIFO (First-In, First-Out) and weighted average cost methods are typically used for assigning costs to inventories that are interchangeable like bulk materials. These methods average costs over time rather than tracking individual item costs.
Tips
Confusing FIFO and weighted average cost method with the LIFO method, which is not typically used under IFRS standards.
Sources
- IAS 2 Inventories - IFRS Foundation - ifrs.org
- Cost Formulas for Inventories (e.g. FIFO) (IAS 2) - IFRScommunity.com - ifrscommunity.com
- Inventory Valuation Methods: FIFO, LIFO, or Average Cost? - AccountingDepartment.com - accountingdepartment.com
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