Which inventory cost flow method/assumption would be most suitable for antique furniture? Justify your choice.

Which inventory cost flow method/assumption would be most suitable for antique furniture? Justify your choice.

Expert Solution

The different inventory cost flow methods are FIFO,LIFO,specific identification method, weighted average method and retail inventory method.These different methods enables effective stock evaluation.

Specific identification method is suitable for antique furniture valuation. In this method , each and every single items of inventory is tracked individually from time to time it enters the inventory and leaves.This system works for companies whose inventory consists of unique and varying items.

Specific identification method is used for more expensive items like furniture ,art galleries,jewellery stores and vehicles. Also items are valued at their purchase price.This method is suitable for startups and small business firms who have low inventory and sales volume.

One of the most important advantage of specific identification method is high degree of accuracy in calculating the cost of inventory when compared with other inventory valuation methods.It provides a perfect matching of cost and revenue. However there is a high chance of income manipulation in this method.

Since antique furniture is unique item requiring special treatment for each specific item specific identification method is suitable.

ekkarill92 answered 2 years ago

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