In a period of rising costs,FIFO produces lower Cost of sales and higher Gross profit than LIFO.

Question

Quizplus · Accepted Answer

This is because FIFO assumes that the first goods purchased are also the first goods sold, which means that older, cheaper inventory is used up before newer, more expensive inventory. In contrast, LIFO assumes that the most recent goods purchased are sold first, which means that newer, more expensive inventory is used up first, leading to higher cost of sales and lower gross profit.

In a Period of Rising Costs,FIFO Produces Lower Cost of Sales