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

Question

Quizplus · Accepted Answer

The FIFO inventory method provides the highest gross profit under conditions of rising prices because the oldest (and therefore lower-cost) inventory is matched against sales revenue first, leaving the most recent (and higher-cost) inventory in ending inventory.

Under Conditions of Rising Prices, the FIFO Inventory Method Provides