If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the cost of goods purchased during the year will be identical.
Inventory refers to the stock that exists in a company for sale. It is very essential for the business for its long term success to maintain inventory records knowing how much goods are sold and how much remains. This helps in the purchase planning for the business.
In U.S the inventory flow assumptions included are LIFO,FIFO, average. In LIFO,FIFO, average are considered as assumptions because the flow of cost will not depend on the physical way the goods gets removed from the inventory. When the companies have identical inventoriable costs and using different inventory flow assumptions where by the price of the goods are not constant then the cost of goods purchased during the year will be identical.
