In periods of falling prices, FIFO will result in a higher ending inventory valuation than the average cost formula.

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Quizplus · Accepted Answer

In periods of falling prices, FIFO will result in a lower ending inventory valuation than the average cost formula because the oldest, cheaper inventory items will be used first in FIFO, leaving the more expensive items in ending inventory. The average cost formula, on the other hand, will spread the cost of inventory evenly across all units, resulting in a lower ending inventory valuation.

In Periods of Falling Prices, FIFO Will Result in a Higher