Assume inventory costs are increasing over time and inventory levels are stable. Which inventory method results in a higher net income and a higher ending inventory?
A) FIFO
B) average cost
C) LIFO
D) conventional retail

Question

Quizplus · Accepted Answer

Under the FIFO (First-In, First-Out) method, the oldest costs are assigned to the cost of goods sold, and the most recent costs remain in ending inventory. In a period of rising prices, this results in lower cost of goods sold and higher ending inventory, leading to higher net income.

Assume Inventory Costs Are Increasing Over Time and Inventory Levels