The selected inventory costing method such as FIFO, LIFO Weighted average impacts:

The selected inventory costing method such as FIFO, LIFO Weighted average impacts:

A. The physical flow of goods.

B. The shipping terms to the buyer.

C. Gross profit and net income.

D. The quantity of inventory items on hand. E. Sales.

Answer. C. Gross profit and net income.

The selection of pricing method like FIFO (First In First Out), LIFO (Last In First Out) or weighted average is relevant to the calculation of cost of goods sold in this regard and the net income as well. This is the amount that is realized from the sale of inventories and the cost assigned on the quantity of units sold in a given period. In the case of the income statement, using different methods for recording these purchases will lead to different cost of goods sold and profit figures; thus, the overall gross profit will be affected and the net income reported on the financial statements will also be different. While the inventory costing method does not have an immediate effect on the material flow of both goods and products, shipping terms, as well as the quantity of the products that belongs to the company’s inventory, the figures on sales will also not be affected. Which is related to the financial reporting of profitability as its main implication.