Specific Identification method
If the units in the ending inventory can be identified as coming from a specific purchase, the specific identification method may be used to price the inventory. The specific identification method might be used in the purchase and sale of high-priced articles, such as automobiles, heavy equipment, and works of art. Although this method may appear logical, many companies do not use it because it has two definite disadvantages. First, in many cases, it is difficult and impractical to keep track of the purchase and sale of individual items. Second, when a company deals in items of an identical nature, deciding which items are sold becomes arbitrary. A company can raise or lower income by choosing to sell the high- or low-cost items.