When inventory prices are rising,the FIFO method will generally yield a gross profit that is
A)less than the LIFO method.
B)equal to the gross profit of the LIFO method.
C)FIFO does not generally cause a gross profit that is different from that of any other costing method.
D)higher than the LIFO method.
E)All of the above are correct.

Question

Quizplus · Accepted Answer

The FIFO method assumes that the first items purchased are sold first, leaving the most recent (and usually more expensive) items in ending inventory. During inflationary periods, this results in a lower cost of goods sold and a higher ending inventory value, leading to a higher gross profit compared to the LIFO method, which assumes that the last items purchased are sold first, resulting in a higher cost of goods sold and a lower ending inventory value. Therefore, the FIFO method generally yields a higher gross profit than the LIFO method during inventory price rising.

When Inventory Prices Are Rising,the FIFO Method Will Generally Yield