Can you tell me how Standard Costing works as opposed to FIFO?

AI generated answer (using internal Slack threads):

Standard Costing and FIFO (First-In, First-Out) are two different methods of inventory valuation used in cost accounting. Standard Costing is a method where you assign a fixed cost to an inventory item, which represents the expected cost to manufacture or purchase that item. This cost remains constant over a period of time until it's updated. This method is often used when the inventory items are identical and it's difficult to track the cost of each individual item. However, this method can lead to variances between the actual cost and the standard cost, which need to be accounted for separately as Purchase Price Variance (PPV). On the other hand, FIFO is a method where the oldest inventory items (those that were added first) are the first ones to be removed from inventory upon sale. This means that the cost of the oldest inventory is used to calculate the Cost of Goods Sold (COGS). This method is often used when the inventory items are not identical and the costs can vary significantly from one item to another. FIFO can provide a closer match between inventory cost and COGS, especially when inventory costs are rising or fluctuating. In terms of handling a buyback process where goods are purchased back from customers at a significantly reduced price, using FIFO could potentially provide a more accurate reflection of COGS. However, this would require tracking the cost of each individual item, which may not be feasible if the inventory items are identical and fungible. ****** Disclaimer: This response was generated by an artificial intelligence assistant based on previous conversations from multiple Slack channels, and may contain inaccuracies or mistakes. ******