There is one question that is killing me to know.
Under LIFO Liquidation we will of course adjust the COGS by adding the Liquidation amount to get a realistic picture of the cost of sale for the company. Now my question is:
If for the same company we would use FIFO wouldn`t this make the COGS even more unreliable since basically it would be even lower than COGS with LIFO liquidation? If that`s the case how come is FIFO considered better even though it assumes cost flow? No matter what method you use to me it seems that unless you can calculate specific cost for each unit all the others are just “bad” in the sense that no one is superior to the other.
Please help me with the logic of this. I know how to calculate everything but it just does not make sense in my mind.
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