Boost your Profitability: How FIFO Method Improves Accurate Decisions & Inventory Management

A major advantage of the FIFO method is that it allows managers to judge performance of the current period independently of the performance of the prior periodTrue or False

True

True.

One of the major advantages of the FIFO (First-In-First-Out) method is that it assumes that the inventory items purchased first are sold first. Therefore, the cost of goods sold (COGS) is based on the cost of the oldest items in stock, and the cost of the ending inventory is based on the cost of the most recent purchases.

This allows managers to calculate the performance of the current period independently of the performance of the prior period because the FIFO method assumes that only the items purchased in the current period are included in the ending inventory. This enables managers to make more accurate decisions regarding pricing, inventory management, and overall profitability.

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