During a period of inflation, using the cost formula will approximate a company's current cost of ending inventory.
A) FIFO.
B) average cost.
C) both FIFO and average cost.
D) lower of cost and net realizable value.

Question

Quizplus · Accepted Answer

During inflation, FIFO (First-In, First-Out) approximates the current cost of ending inventory because it assumes that the oldest costs are assigned to the cost of goods sold, leaving the most recent costs in ending inventory.

During a Period of Inflation, Using the Cost Formula Will