Under conditions of rising prices, the FIFO inventory method provides the highest gross profit because the most recent purchase costs are matched against sales revenue.

Question

Quizplus · Accepted Answer

In rising prices, the cost of goods sold using the FIFO method will be lower than using LIFO because it assumes that the goods sold are from the oldest inventory (which cost less), leaving the newer and more expensive inventory unsold. This results in a higher gross profit.

Under Conditions of Rising Prices, the FIFO Inventory Method Provides