CA7.5 (LO 3) Writing (Average-Cost and FIFO) Draft written responses to the following items.

a. Describe the cost flow assumptions used in average-cost and FIFO methods of inventory valuation.

b. Distinguish between weighted-average cost and moving-average cost for inventory costing purposes.

c. Identify the effects on both the statement of financial position and the income statement of using the average-cost method instead of the FIFO method for inventory costing purposes over a substantial time period when purchase prices of inventoriable items are rising. State why these effects take place.