Question

1. What is the function of FIFO or Average Cost in the manufacturing and non-manufacturing industry.?

2. Summarize the flow of manufacturing costs.?
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Answer 1

Answer:

1.The FIFO method is used for cost flow assumption purposes. In manufacturing, as items progress to later development stages and as finished inventory items are sold, the associated costs with that product must be recognized as an expense.

2.The flow of costs then moves to work-in-process inventory, where labor, machining, and overhead costs are added to the cost of the raw materials. Once the production process is complete, the costs move to the finished goods inventory classification, where the goods are stored prior to sale.