In a period of rising prices the costs allocated to ending inventory may be understated in the
A) average-cost method.
B) FIFO method.
C) gross profit method.
D) LIFO method.

Question

Quizplus · Accepted Answer

In a period of rising prices, the LIFO method will result in higher costs being allocated to inventory, as the most recent costs (which are likely higher) will be matched with units sold first, leaving older, lower cost inventory in ending inventory. Therefore, using the LIFO method in a period of rising prices will result in a more accurate valuation of ending inventory.

In a Period of Rising Prices the Costs Allocated to Ending