ECONOMICS

Detailed explanation-1: -FIFO can be a better indicator of the value for ending inventory because the older items have been used up while the most recently acquired items reflect current market prices.

Detailed explanation-2: -FIFO method (first in, first out) FIFO is an accounting method that assumes the inventory you purchased most recently was sold first. Using this method, the cost of your most recent inventory purchases are added to your COGS before your earlier purchases, which are added to your ending inventory.

Detailed explanation-3: -Under FIFO, your Cost of Goods Sold (COGS) will be calculated using the unit cost of the oldest inventory first. The value of your ending inventory will then be based on the most recent inventory you purchased.

Detailed explanation-4: -FIFO is calculated by adding the cost of the earliest inventory items sold. For example, if 10 units of inventory were sold, the price of the first 10 items bought as inventory is added together. This equals the cost of goods sold. Depending on the valuation method chosen, the cost of these 10 items may be different.

Detailed explanation-5: -To calculate FIFO (First-In, First Out) determine the cost of your oldest inventory and multiply that cost by the amount of inventory sold, whereas to calculate LIFO (Last-in, First-Out) determine the cost of your most recent inventory and multiply it by the amount of inventory sold.