Evaluating AVCO and FIFO

Question 1

2 advantages of AVCO

Answer 1

keeping a store ledger card is better than FIFO as you don’t have to keep listing different batches of inventory until they are sold.
the valuation of closing inventory can’t be skewed by large fluctuations in purchase prices

Question 2

2 disadvantages in AVCO

Answer 2

it is less easy to calculate than FIFO

because they are averages, inventory valuation us often at prices that never existed

Question 3

2 advantages of FIFO

Answer 3

it is easier and quicker to calculate than AVCO
it is more accurate as it includes the actual costs of items and it is reasonable to assume that the most recently bought inventory has not been sold yet

Question 4

2 disadvantages of FIFO

Answer 4

keeping a store ledger card is longer than avco as you keep having to list batches of inventory that haven’t been sold
the valuation of closing inventory can be skewed by large fluctuations in purchase prices