Compared with FIFO, AVCO generally:

Compared with FIFO, AVCO generally:

• A. Always matches actual purchase prices
• B. Uses average price which may not reflect individual purchase costs
• C. Reflects prices in a more current manner for ending inventory
• D. Eliminates variability in cost of goods sold

Answer: (B)

AVCO uses a weighted average cost per unit derived from all goods available for sale, and ending inventory is valued at that single average cost. Because that price blend comes from many purchases, it may not reflect the cost of each specific batch you actually have in stock. So, compared with FIFO, AVCO generally uses an average price that may not match individual purchase costs. The other statements aren’t right: AVCO doesn’t always match actual purchase prices, it doesn’t necessarily reflect prices in a more current manner (that role is more aligned with the newer costs under FIFO), and while AVCO smooths price changes, it doesn’t completely eliminate variability in cost of goods sold.

AVCO uses a weighted average cost per unit derived from all goods available for sale, and ending inventory is valued at that single average cost. Because that price blend comes from many purchases, it may not reflect the cost of each specific batch you actually have in stock. So, compared with FIFO, AVCO generally uses an average price that may not match individual purchase costs. The other statements aren’t right: AVCO doesn’t always match actual purchase prices, it doesn’t necessarily reflect prices in a more current manner (that role is more aligned with the newer costs under FIFO), and while AVCO smooths price changes, it doesn’t completely eliminate variability in cost of goods sold.