Last in first out or lifo, Cost Accounting

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Last in first out or LIFO

LIFO is based upon the assumption such the stock purchased last is issued first. Stock valuation should here be based upon the prices ruling on acquisition of last stocks.

Advantages

1. Product costs tend to be based upon recent market prices and are thus realistic.

2. A charge to production is like closely concern to current price levels like possible

Disadvantages

1. Stocks are valued at the oldest prices.

2. This includes tedious calculations whether the price of materials fluctuates from time to time.

3. Comparison of one job along with another may be difficult and unfair.


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