When purchase costs of inventory regularly decline, which method of inventory costing will yield the lowest cost of goods sold?
A) FIFO.
B) LIFO.
C) Weighted average.
D) Specific identification.
E) Gross margin.

Question

Quizplus · Accepted Answer

When purchase costs of inventory regularly decline, LIFO (Last In, First Out) method of inventory costing will yield the lowest cost of goods sold. Under LIFO, the most recent purchases are assumed to be sold first, so the cost of goods sold reflects the higher, more recent costs. Therefore, as prices decline, the older, lower-cost inventory remains on the balance sheet, causing COGS to be lower.

When Purchase Costs of Inventory Regularly Decline, Which Method of Inventory