Chapter 6
KAPLAN PUBLISHING
105
5
Methods of calculating the cost of inventory
Method Key
points
Unit cost
This is the actual cost of
purchasing identifiable
units of inventory.
Only used when items of
inventory are individually
distinguishable and of high
value.
FIFO – first in
first out
For costing purposes, the
first items of inventory
received are assumed to
be the first ones sold.
The cost of closing inventory is
the cost of the most recent
purchases of inventory.
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