The best inventory costing method for highly specialized inventory items is Specific Identification Method.
The specific identification method of inventory valuation is useful for businesses with a low turnover of high-cost items like automobile dealers, furniture stores, and jewelry stores. Specific identification involves tagging every item in inventory with its purchase price and any associated costs since it was purchased. Then, the value of all the remaining inventory in stock is added up to get the total cost of the company’s inventory.
Once a specific inventory item is sold, the cost of the unit is assigned to cost of goods sold. Specific identification requires tedious record keeping and is typically only used for inventories of unique identifiable goods that have a fairly high per-unit cost (e.g., automobiles, fine jewelry, and so forth).Specific identification gives the business owner very accurate information on the value of their inventory.
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