If the unit cost of inventory is increasing during a period, a company using the LIFO inventory method will show less gross profit for the period than if it had used the FIFO inventory method.

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Quizplus · Accepted Answer

This is because LIFO assigns the most recent costs to units sold, which are typically higher due to inflation or rising costs. Therefore, the cost of goods sold under LIFO will be higher, resulting in a lower gross profit compared to FIFO, which assigns the earliest costs to units sold.

If the Unit Cost of Inventory Is Increasing During a Period