Business Administration 2257 Chapter Notes - Chapter 6: European Route E62, Income Statement, Perpetual Inventory

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Three methods of inventory cost determination: fifo, specific identification, and. Specific identification method tracks the actual physical flow of the goods in a perpetual inventory system only. Each item is tagged with a specific unit cost so that the cost of ending inventory and cost of goods sold can be determined at any point in time. This method is appropriate for goods that aren"t interchangeable and for goods that are produced and segregated for specific projects. Used when there"s a small number of pricy items that are easily distinguishable (e. g. by physical characteristics, serial numbers, etc. ). Example of items that appropriately use this method: jewelry, artwork, pianos, cars. While it works well with high-unit cost items, does not work well with other situations. Only 4% of canadian companies use specific id method of cost determination. Fifo: where the cost of the earliest purchased goods are the first ones to be sold.

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