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Chapter 5
4.4 Advantages and disadvantages of each method
Method Advantages Disadvantages
FIFO Up to date closing inventory value Out of date valuation on issues to
as the recent priced items remain in production as old prices are used to
inventory. value issues to production.
Identical jobs may have different
costs.
LIFO Up to date valuation on issues as Out of date closing inventory value as
the recent priced items are used to old prices as used to value inventory.
value issues to production.
AVCO A compromise on inventory The average price rarely reflects the
valuation and issues. actual purchase price of the material.
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