Which inventory costing method is based on the assumption that costs should be charged against revenue in the order, in which they were incurred?

Perpetual inventory
LIFO
FIFO
Average cost

The correct answer is C. FIFO (First-In, First-Out).

FIFO is an inventory costing method that assumes that the first goods that were purchased are also the first goods that were sold. This means that the cost of goods sold is based on the cost of the oldest inventory items.

The other three options are incorrect.

A. Perpetual inventory is a system of inventory management that keeps track of inventory on a continuous basis. This means that the company knows exactly how much inventory it has on hand at all times.

B. LIFO (Last-In, First-Out) is an inventory costing method that assumes that the last goods that were purchased are also the first goods that were sold. This means that the cost of goods sold is based on the cost of the newest inventory items.

D. Average cost is an inventory costing method that averages the cost of all the inventory items on hand. This means that the cost of goods sold is based on the average cost of all the inventory items on hand.

Exit mobile version