Which one of the following methods of inventory costing produces ending stock cost close to the market value of the inventory?

LohaHridoy
  1. FIFO
  2. LIFO
  3. AVCO or averrage cost

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Answer: Option 1

FIFO methods of inventory costing produces ending stock cost close to the market value of the inventory. FIFO (First-in, first-out) method is based on the perception that the first inventories purchased are the first ones to be sold. It is a cost flow assumption for most companies. Since the theory perfectly matches to the actual flow of goods, therefore it is considered as the right way to value inventory.

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