In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:
A) Weighted average.
B) Moving average.
C) FIFO.
D) LIFO.

Question

Quizplus · Accepted Answer

FIFO (First-In, First-Out) assumes that the oldest inventory items are sold first. In a rising cost environment, this method results in the lowest cost of goods sold and the highest ending inventory because the newest, most expensive items remain in inventory. This is because the cost of goods sold reflects the cost of the earliest goods acquired, which are likely to be cheaper. As a result, the ending inventory balance will be higher since it is based on the higher cost of the most recently acquired goods.

In a Period When Costs Are Rising and Inventory Quantities