Answer
Arguments for the specific identification method are as follows:
(1) It provides an accurate and ideal matching of costs and revenues because the cost is specifically identified with the sales price.
(2) The method is realistic and objective since it adheres to the actual physical flow of goods rather
than an artificial flow of costs.
(3) Inventory is valued at actual cost instead of an assumed cost.
Arguments against the specific identification method include the following:
(1) The cost of using it restricts its use to goods of high unit value.
(2) The method is impractical for manufacturing processes or cases in which units are commingled and identity lost.
(3) It allows an artificial determination of income by permitting arbitrary selection of the items to be
sold from a homogeneous group.
(4) It may not be a meaningful method of assigning costs in periods of changing price levels
Work Step by Step
No formula required.
